rediff.com

NewsApp (Free)

Read news as it happens
Download NewsApp

Available on  

Rediff News  All News 
Rediff.com  » Business » Crisil lowers India's GDP forecast to 6%

Crisil lowers India's GDP forecast to 6%

April 15, 2013 17:36 IST

Ratings agency Crisil on Monday cut its FY14 growth forecast for India to six per cent from the earlier 6.4 per cent citing a variety of reasons, including the high lending rates, weaker pick-up in consumption and issues around mining and project clearances.

"We have cut the GDP growth forecast for FY14 to six from 6.4 per cent expected earlier," Crisil Research said in a note.

In the Budget, Finance Minister P Chidambaram had said the government was targeting a growth of 6.1-6.7 per cent for the current fiscal.

Crisil said a weaker-than-expected pick-up in household consumption being witnessed at present could begin to act as a drag on manufacturing.

The rating agency has cited "downward rigidity", wherein the repo rate cuts by the Reserve Bank are not getting passed in lending rates, as among the factors for the downward revision.

"Although we continue to believe that growth in FY14 will be greater than last year's 5 per cent, the recovery is fragile and hinges critically on a normal monsoon," the report said.

Issues around policy-making, especially in mining and the "lack of speedy project clearances, which continue to hurt manufacturing, infrastructure and investment activity" also topped Crisil's list of factors that it felt will hurt growth.

Additionally, the lowering of the European GDP forecast to -0.5 per cent from the earlier -0.1 per cent by some estimates may have an adverse impact on the domestic growth, the report said.

Economic growth in FY13 is expected to come down to a decade low of 5 per cent, according to estimates.

International rating agencies like Standard & Poor's (Crisil's parent company) and Fitch had last year threatened to downgrade the country's rating to junk on lower growth, troubles on the policy front and the high fiscal deficit and current account deficit. The CAD had hit a historic high of 6.7 per cent in the third quarter of last fiscal.

Crisil said it expects the fiscal deficit during FY14 to be at 5.1 per cent against the budget estimate of 4.8 per cent saying government will not be able meet the 19 per cent growth target in tax collections due to lower growth.

However, it said CAD, which is slated to breach record highs in FY13, could go down to 4.5 per cent in the current fiscal, which would still be higher than the comfort level.

"Lower crude and metal prices are expected to trim the CAD to 4.5 per cent of GDP in FY14," it said, adding for the rupee to be stable, the country will have to attract $ 90-95 billion of inflows which is a manageable task.

On the exchange rate front, the report said the rupee will maintain the current levels of around 54 to a dollar by the end of the fiscal.

Inflation, which cooled to a record 39 month low in March at 5.96 per cent, will be at 6.3 per cent by March 2014, Crisil said, adding it is lowering its estimate from 6.5 per cent on this front.

© Copyright 2013 PTI. All rights reserved. Republication or redistribution of PTI content, including by framing or similar means, is expressly prohibited without the prior written consent.
Tags: Crisil, CAD, FY14, GDP, FY13