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Rediff.com  » Business » Biz climate improves in May; growth likely to be at 5.3%

Biz climate improves in May; growth likely to be at 5.3%

Last updated on: June 04, 2013 16:29 IST

Indian flagBusiness climate in the country improved last month buoyed by rising output of intermediate goods as well as tourist earnings and the government's reform initiatives, according to a report.

The 'BluFin Business Cycle Indicator', which reflects various macroeconomic trends on a monthly basis, stood at 166.3 points in May, 5.8 per cent higher compared to the same month last year, suggesting that the Indian economy is growing at a faster rate than the previous year.

The year-on-year growth rate noted in the previous month was at 5.1 per cent.

Historically, the BCI has grown by an average of seven per cent year-on-year, financial information provider BluFin said on Tuesday.

Moreover, BCI has been indicating a reversal in the economic slowdown since July 2012 and expects that Indian economy would grow at 5.3 per cent in the first quarter of financial year 2013-14.

"The growth has been aided by improved production of intermediate commodities like pig iron and aluminium, rising tourist earnings, easing liquidity conditions and strengthening capital markets," the report said.

It further said that government has been instrumental in boosting infrastructure investments, generating a consistent improvement in the production of intermediate commodities such as pig iron and aluminium, along with prudent management of non-plan expenditures.

"Also, timely regulatory reforms are ensuring a steady increase in foreign direct investment in the country," it added.

However, foreign exchange and international trade continue to be a concern despite a slowdown in gold and oil prices and a decline in domestic inflation.

A surge in domestic gold demand is hindering effective management of the Current Account Deficit.

"The continued uptrend in the BCI is consistent with the just released GDP numbers.

"If fiscal policy stays restrained, and monetary easing continues at an accelerated pace, a genuine economic recovery is very much possible," BluFin Senior Advisor Surjit Bhalla said.

The index is based on components in four broad categories: capital market, foreign trade, policy and the real economy.

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