In World Economy News 28/05/2015
Rating agency ICRA today said the Indian economy will grow in the range of 7.6-7.8 per cent in the current fiscal, despite the headwinds posed by muted global growth and an unfavourable monsoon outlook.
Two years post the currency crisis of 2013 and one year into the tenure of Prime Minister Narendra Modi’s government, moderation in inflation, external account vulnerability and the central government’s fiscal deficit have bolstered the Indian economy’s ability to withstand bouts of global volatility and fluctuation in investor sentiment, it said.
“The improvement in macroeconomic fundamentals reflects the policy actions taken by the government and the central bank, which have been supplemented by tailwinds such as benign commodity prices,” it said.
Higher government spending on infrastructure, simplification of clearances, easing of norms for foreign direct investment, continued reform momentum and further monetary easing of 0.5 per cent are expected to support a revival in investment activity in the current fiscal, led by sectors such as roads, urban infrastructure and freight corridors, it said.
Moreover, moderating inflation is expected to boost urban consumer demand, while rural demand may post an improvement, it said.
Nevertheless, it said, the pace of fresh investment in some sectors such as thermal power and steel is likely to remain sluggish on account of continuing constraints posed by the lingering sector-specific issues.
India’s current account deficit to print at 0.9 per cent of GDP in 2015-16, a substantial improvement from the alarming levels above 4 per cent of the GDP recorded in 2011-12 and 2012-13, it said.
While a recovery in domestic demand and investment conditions is expected to expand import volumes, lower average commodity prices would restrain growth in value terms, it said.
Notwithstanding the long-term benefits expected from the Make in India programme, and the government’s focus on improving ease of doing business, enhancing infrastructure and moderating inflation, muted improvement in global growth and the rupee appreciation will lead to modest economic growth of India, and act as a drag on overall economic expansion, it added.
It further said that “growth of gross value added (GVA) at basic prices is estimated to decline to 7 per cent in Q4 FY15 from 7.5 per cent in Q3 FY15, on account of factors such as crop damage caused by unseasonal rainfall, decline in growth of electricity, contraction in non-POL merchandise exports and moderation in the pace of expansion of central government spending.
