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Rediff.com  » Business » Icra lowers GDP forecast to 5.7%

Icra lowers GDP forecast to 5.7%

Last updated on: August 24, 2012 09:24 IST

Icra lowers GDP forecast to 5.7%

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Rating agency Icra has revised down its GDP growth estimate to 5.7 per cent, citing absence of concrete improvements in the investment sentiment, weaker monsoon and a likely rise in inflation, which limit RBI's room to spur the growth by cutting rates.

The agency joins a long list of analysts who have downgraded the country's growth estimates citing similar reasons. The lowest estimate is 5.3 per cent, by JP Morgan.

There is an "absence of concrete improvement in investment sentiment", Icra said today, adding, "Delays in obtaining regulatory clearances, environmental approvals and issues related to land acquisition continue to dampen investment sentiments".

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Photographs: Reuters
Tags: Icra , GDP , JP Morgan , RBI

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Icra lowers GDP forecast to 5.7%

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In June, it had said that GDP will expand by 6.2-6.4 per cent.

The unfavourable progress of monsoon will result in a strain on budget calculations, it said on Thursday, adding that fiscal deficit target of 5.1 per cent is likely to go up to 5.7-6 per cent.

The government is also likely to overshoot its borrowing target of Rs 2 lakh crore by around Rs 60,000-90,000 crore (Rs 600-900 billion), it said.

The current account deficit situation will improve to 3.7 per cent from the last fiscal's record high of 4.2 per cent, it said, adding that attracting capital flows is a challenge.

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Photographs: Jayanta Dey/Reuters
Tags: GDP , Icra

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Icra lowers GDP forecast to 5.7%

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On the monsoon front, the agency said it expects a healthy rabi (winter) crop to offset impact of monsoons on the kharif crop.

Icra has, however, revised upwards its average headline inflation expectation to 7.5-7.7 per cent for the fiscal from the earlier 7-7.5 per cent.

This will limit the Reserve Bank's scope to bring down its policy rates and the central bank is unlikely to cut rates in its September review of the monetary policy, it said.


Photographs: Arko Datta/Reuters

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