Indian economy to grow at 4.9% in 2013-14: India Ratings and Research.

COIMBATORE: The economy would grow 4.9% in the current financial year despite favourable monsoon brightening the scope for agriculture performance. The economy will grow 4.9% year-on-year in 2013-14, similar to the 5% growth recorded in 2012-13, India Ratings and Research said.

The industrial and services sector growth performance in 2013-14 (FY14) is likely to be lower than 2012-13 (FY13), it said. “While in general economic growth performance in FY14 is likely to be similar to the FY13 levels, the current account may improve considerably” said Devendra Kumar Pant, chief economist and head of public finance, India Ratings.

This will strengthen rupee which the agency expects to stabilize to around 59-61 to the dollar by the end of 2013-14. Bolstered by agriculture and exports, India Ratings expects economic growth to improve from the third quarter of FY14. Three consecutive months of double-digit exports growth and healthy agriculture performance due to 6% above normal rainfall in 2013 would increase demand for industrial goods and services, it said. However, the growth is unlikely to be stupendous.

“Slower growth in the industrial sector and rigid expenditure are likely to result in a slippage from the FY14 (budget) fiscal deficit (4.8% of GDP) to 5.2%,” the agency said. However, fiscal deficit control by cutting planned expenditure will not be favourable for the economy in the medium- to long-run, it said.

Despite the slower growth and fiscal slippage, India Ratings, which is part of the Fitch Group, does not expect consolidated debt (centre and states) to be unsustainable. “Debt/GDP ( gross domestic product), which has corrected sharply during the years of fiscal consolidation, continues to improve, albeit at a slower pace,” the agency said.

While domestic demand is likely to revive from the third quarter of FY14, the recovery will remain fragile so long as investment demand does not revive, it said. “A speedier administrative action on the economic/policy initiatives already taken and quick movements on pending reforms agenda are therefore crucial,” the agency said.

“Passing of the Land Acquisition Bill could be a right step forward, but environment/forest clearances remain bottlenecks for project implementation. Sorting such issues at the earliest would be crucial for reviving investment demand in the economy,” it said.

India Ratings expects average inflation in FY14 to be lower than FY13, but outside Reserve Bank of India’s (RBI) comfort zone. It also expects monetary conditions to remain tight and another 25 bps-50 bps (0.25%-0.5%) hike in the repo rate in the remaining part of FY14.

Source : timesofindia.indiatimes.com