India Ratings & Research (Ind-Ra) declared that the Indian economy will grow at 4.9 percent year on year in Financial Year 2014, similar to 5 percent escalation in Financial Year 2013
India Ratings & Research (Ind-Ra) declared that the Indian economy will grow at 4.9 percent year on year in Financial Year 2014, similar to 5 percent escalation in Financial Year 2013, regardless of positive monsoon brightening the possibility of agriculture performance. The industrial and services sector growth performance in Financial Year 2014 is expected to be lesser than Financial Year 2013’s.
Reportedly, Chief Economist and Head – Public Finance at Ind-Ra, Dr. Devendra Kumar Pant said “While in general economic growth performance in FY14 is expected to be similar to the FY13 levels, current account may get better significantly. This will reinforce rupee, which Ind-Ra anticipates to soothe around 59-61/USD by FYE14.”
Boosted by agriculture and exports, Ind-Ra supposes economic growth to perk up from Q3FY14. Three successive months of double-digit exports growth and strong agriculture performance owing to 6 percent above normal rainfall in 2013 would raise demand for industrial goods and services. Though, the growth is doubtful to be ground breaking.
Sluggish growth in the industrial sector and inflexible spending are possible to lead to a slippage from the FY14 (budget) fiscal deficit (4.8 percent of GDP) to 5.2 percent. But, fiscal deficit control by trimming down planned spending will not be good for the economy in medium- to long-run. In the face of the lethargic growth and fiscal slippage, Ind-Ra does not anticipate combined debt (centre and states) to be untenable. Debt/GDP, which has corrected roughly during the years of fiscal consolidation, persists to pick up, although at a slower speed.
While in-house demand is expected to restore from Q3FY14, the revival will stay flimsy so long as investment demand does not perk up. A swift administrative action on the economic/policy proposals already taken and fast movements on awaiting reforms agenda are thus vital. Passing of the land acquisition bill could be a correct step ahead, but environment/forest permissions remain blockages for project execution. Fixing such matters at the earliest would be vital for bracing investment demand in the economy.
Ind-Ra expects standard inflation in Financial Year 2014 to be poorer than that in Financial Year 2013, but outside the comfort zone of Reserve Bank of India’s (RBI). The 10-year G-sec rate may stay between 8.1 percent and 8.3 percent by FYE14.
According to media reports, Director – Public Finance at Ind-Ra, Dr. Sunil Kumar Sinha said “Ind-Ra expects l6 monetary conditions to remain tight and another 25bp-50bp hike in the repo rate in the remaining part of FY14. However, over the next few quarters, Ind-Ra expects RBI to reduce the spread between marginal standing facility and repo rates to the normal 100bp and undertake more liquidity infusion measures to correct the inverted yield curve.”
