Money Matters - Simplified

HSBC cuts India GDP forecast on lack of reforms

Indian GDP growth forecast cut by HSBC Ever burgeoning fiscal deficit, botched-up reforms and lack of investment in key infrastructure areas is stalling the growths, most experts opine.

Global banking behemoth HSBC cut India Gross Domestic Product (GDP) forecast owing to a couple of factors, primarily being the lack of reforms and a challenging global economic backdrop.

HSBC expects that Indian GDP will grow at 5.7 percent, a sharp drop from its previous forecast of 6.2 percent.

The GDP for fiscal 2014 was cut down from 7.4 percent to 6.2 percent. This announcement from HSBC comes at a time when the government keeps getting embroiled in one controversy after another.

Growth projections
Another global banking major, Morgan Stanley, has already cut growth forecast to 5.1 amid concerns of poor government finances, weak external demand and slugging investment from private sector.

These reports will give plenty of ammunition to the opposition, which is already hell-bent on ousting the government on issues ranging from corruption to lacklustre performance.

Major economists at CRISIL, CLSA, Citi and the US Investment House too have cited similar growth projections in recent months. Ever burgeoning fiscal deficit, botched-up reforms and lack of investment in key infrastructure areas is stalling the growths, most experts opine.

As per a report released by Morgan Stanley, "In the event of continued inaction from the government, we see very high risk of a potential deeper macro stress scenario." It further warned that the growth rate may slide further if current policy paralysis at the Centre persists.

Little relief is in the offing for the embattled government as industrial production is barely growing, inflation remains stubbornly high and private sector investment is stifled, choked by high interest rates.