Stable Govt Post-Elections To Help India Grow: Crisil
"By not doing enough to accelerate growth, and thus job creation, the country risks setting off a vicious cycle of lower household income, consumption and investment spending that would be so much harder to shake off -- not to mention the utter loss of the demographic dividend," the report said.
According to Crisil, the task before the new government is clear -- the focus has to be on improving the efficiency of the economy by de-bottlenecking it.
Crisil said the evolving investment dynamics, however, show that neither a surge in investments nor improvement in efficiency witnessed during fiscals 2004-2011, which led to near 9 percent GDP growth, would recur in the next five years.
"There is a natural limit to any upside beyond 6.5 percent. And if the government formation after the ongoing general elections becomes a messy affair with no clear mandate, our bets on growth are off," the report added.
The agency said if progress on the policy front, which is expected to improve the investment climate, does not manifest as envisioned, growth could slip to an average 5 percent over the next five years.
The cost of policy inaction would thus be very high for the economy, the report said.
It believes, among other factors, slower-than-expected recovery in the U.S. and the eurozone or a severe failure of the monsoon in two-three years could also lower growth below its forecast.
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