India is likely to clock GDP growth of 7.4 per cent in the current fiscal and consumption is likely to be the main driver of growth in the foreseeable future, says an HSBC report.
According to the global financial services firm, investment cycle revival is not expected to happen quickly or easily and the country is likely to see a consumption driven economic growth model.
Continued rise on stalled projects do not provide much confidence for investment activity, HSBC said in a research note adding consumption is likely to be the main driver of growth in the foreseeable future.
“We expect GDP growth to remain flat at 7.4 per cent in FY17 (year starting April 2016). The January-March period saw rise in stalled investment projects over the January to March period, marking the third consecutive quarter of their rise. However, the incremental stalling of investment projects was top heavy – if the top two newly stalled projects (in steel and electricity generation, respectively) were removed, the stalling rate and stalled projects as a percentage of GDP moderated slightly during January-March period.
Moreover, there was a rise in the proportion of private sector projects stuck due to unfavourable market conditions. Yet, one-third of projects continue to be stuck due to policy issues like clearance delays and raw material availability, which can be addressed by government executive action. The bad news is that investment cycle revival is not expected to happen quickly or easily. The good news is that there are some drivers out there that could make it happen… eventually,” HSBC said.