Crisil projects Indian economy to grow at 6 pc in FY24

Crisil in its latest report released on Wednesday said that a global economic slowdown — if not a recession — remains on the cards under the weight of rising interest rates and as a result, exports may remain a drag on industrial activity.

It said monsoon will critically influence industrial prospects through impact on inflation and rural demand.

The rating firm noted that the monsoon has weakened again, with all-India rainfall turning deficient at 5% below the long period average (LPA) as on August 15.

It pointed out that the El Nino has set in as expected adding that its timing and intensity will determine rainfall patterns this year.

"Overall, we expect GDP to grow 6.0% this fiscal compared with 7.2% the previous fiscal," Crisil said.

Commenting on the July inflation number, Crisil said that higher-than-expected inflation reading and continued food price pressure, despite a softening core, put monetary policy in a dilemma.

"While we expect the Monetary Policy Committee of the Reserve Bank of India to hold policy rates in its October meeting, the evolving inflation dynamics suggest that policy is likely to remain tight for longer with the first rate cut seen only in the early part of next fiscal," it said.

Driven primarily by high vegetable prices, India's retail inflation surged to 7.44% in July this year breaching the upper tolerance band of RBI.

"The steep rise in food inflation to 11.5% in July from 4.5% in June and 3% in May is due to accelerating inflation in vegetables, cereals, pulses, spices, and milk. This is the highest rate of food inflation since April 2020," Crisil said.

(With UNI inputs)