The services sector will drive growth this fiscal year: the crisis


With the ongoing Russian-Ukrainian war clouding global growth forecasts, Crisil believes India’s economy is more resilient today than it was during the 2008 global financial crisis and the services sector will be the engine of growth during this financial year.

“This fiscal year, we see services driving growth, compared to the export and manufacturing-led growth of the past two fiscal years. This will help MSMEs [micro, small and medium-sized enterprises] rebound as demand for their services improves,” said Amish Mehta, Managing Director and CEO of Crisil. Activity area.

Stressing that inflation “remains the elephant in the room”, Mehta expressed hope that it will be brought under control in the short term.

Official data indicated that the Indian economy grew by 8.7% in 2020-2021, which is slightly lower than the 8.9% projected by the second advance estimate in February 2022.

Crisil maintained its real GDP growth projection for the current fiscal year 2023 at 7.3%, with downside risks.

In an interview with Activity areaMehta noted that as growth slows, so could investment spending, which in turn could dampen credit drawdown.

“…companies have a good borrowing capacity. Even banks are now in a very good position in terms of provisioning, balance sheets, liquidity, non-performing assets and capital. It shows they can lend to good credit,” he said, adding that India’s economy is much more resilient than it was during the 2008-09 crisis.

Large and medium-sized companies are better prepared, given the deleveraging cycle, he said, noting that Crisil’s credit ratio of 5.04 times for the second half of fiscal 2022 underscores this.

With Covid-19 infection rates falling, the situation should improve, Mehta added.

“But now global economies are suddenly slowing down due to geopolitical conflicts. Even if this happens, crude oil and natural gas prices have soared, inflation is raging in commodities and metals, and there is also uncertainty over food prices,” he said. he declares.


Crisil’s forecast for consumer inflation is 6.3%. The first half of this fiscal year should see retail price inflation of around 7% and the second half a little lower.

“We haven’t seen this level of wholesale price index inflation in India in the past two decades. We are above the RBI’s Consumer Price Index inflation range,” he said, adding that further rate hikes are inevitable.

“Certainly the government and the RBI have taken steps to calm inflation. You had the rate hike in May, another is due in June and then more as we progress through this financial year,” he said. he said, noting that the government has recently lowered excise duty rates on crude oil products, which would help dampen inflation.

If crude remains above $100, India’s balance of payments, current account deficit and exchange rates would come under pressure.

“But our ability to respond to crises – as a country, as banks, as credit institutions and as businesses – is much better now than it was before,” he said. he said, while warning that uncertainties such as future waves and variants of Covid-19, and geopolitical tensions remain clear and pose risks.

The monsoon season will be critical for the rural sector, which must take into account the rising prices of food, pesticides and seeds, as well as diesel used for agricultural activities, he underlined.

All of this will put pressure on the budget deficit. The government will have to think about borrowing and subsidizing more.

Published on

June 03, 2022

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