What is the impact of Crisil Rating Downgrade

What is the impact of Crisil Rating Downgrade

What is the latest Crisil Rating for India

Reasons for downgrading Rating?

Crisil lowers current fiscal growth forecast for India to 6%

16.4.2013

Ratings agency Crisil today cut its FY14 growth forecast for India to six per cent from the earlier 6.4 per cent citing a variety of reasons, including the high lending rates, weaker pick-up in consumption and issues around mining and project clearances

Crisil said a weaker-than-expected pick-up in household consumption being witnessed at present could begin to act as a drag on manufacturing.

The rating agency has cited "downward rigidity", wherein the repo rate cuts by the Reserve Bank are not getting passed in lending rates, as among the factors for the downward revision.

Issues around policy-making, especially in mining and the "lack of speedy project clearances, which continue to hurt manufacturing, infrastructure and investment activity" also topped Crisil's list of factors that it felt will hurt growth. Additionally, the lowering of the European GDP forecast to -0.5 per cent from the earlier -0.1 per cent by some estimates may have an adverse impact on the domestic growth, the report said.

Economic growth in FY13 is expected to come down to a decade low of 5 %

Crisil said it expects the fiscal deficit during FY14 to be at 5.1 per cent against the budget estimate of 4.8 per cent saying government will not be able meet the 19 per cent growth target in tax collections due to lower growth.

However, it said CAD, which is slated to breach record highs in FY13, could go down to 4.5 per cent in the current fiscal, which would still be higher than the comfort level.

"Lower crude and metal prices are expected to trim the CAD to 4.5 per cent of GDP in FY14," it said, adding for the rupee to be stable, the country will have to attract USD 90-95 billion of inflows which is a manageable task.

On the exchange rate front, the report said the rupee will maintain the current levels of around 54 to a dollar by the end of the fiscal.

Inflation, which cooled to a record 39 month low in March at 5.96 per cent, will be at 6.3 per cent by March 2014, Crisil said, adding it is lowering its estimate from 6.5 per cent on this front.