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Rediff News  All News  » Business » Ficci lowers FY'14 economic growth to 5%

Ficci lowers FY'14 economic growth to 5%

October 10, 2013 16:50 IST

A survey by industry body Ficci has lowered the country's economic growth forecast for 2013-14 fiscal to 5 per cent, from 6 per cent projected in July, indicating tough times ahead.

"Economic growth in the current year would be restrained and we should be prepared for another year of slow growth. The median forecast for GDP growth in 2013-14 by the participating economists stands at 5 per cent," Ficci's Economic Outlook Survey said.

The survey results also indicate that inflation risks have resurfaced, with headline inflation rate expected to be around 6 per cent by March 2014. Besides, it estimates that the rupee will hover in the range of 62-65 per US dollar in the near future.

"The expectation of reduced foreign capital inflows and still high (though moderating) Current Account Deficit (CAD) has shaped this view on the rupee movement," the survey said. Elevated food prices and the sharp fall in the rupee value continue to put pressure on prices, it added.

The survey said that although some positive developments -- good monsoons, better performance of agricultural sector, improvement in exports and clearances to infrastructure projects -- make the case for recovery a little stronger, it will take some more time to witness firm signs of turnaround.

The survey further revealed that expectations with regard to performance of the industrial sector have also taken a hit. The participating economists expect Index of Industrial Production (IIP) to grow by 1.7 per cent in FY'14, which is half the 3.5 per cent growth that was projected in the previous round of the survey held in July 2013.

On the external front, the CAD to GDP ratio is expected to witness an improvement in the second half of the fiscal. This ratio is estimated at 4.5 per cent for Q3 FY14 and at 4 per cent for the year 2013-14.

"It will be important to look at both export and import side of the trade equation if CAD is to be brought under control," the survey said.

To rationalise the gold demand, economists said that Indian investors should be given alternatives to gold as a hedge against inflation. "New and stable financial products that are lucrative enough for the households to shift their savings away from gold should be provided," said the Ficci survey.

Further, it added, the government should come up with more financial products like Inflation Indexed Bonds (IIBs), Gold Accumulation Plan (GAP), Gold ETFs to normalise the demand for gold.

Regarding the outlook for the provisioning requirements for non-performing (NPAs) in the banking sector in the current year, the survey results show that provisioning requirement of NPAs is likely to increase by end of FY14.

It said: "If the current weak economic situation persists it will have a significant impact on the asset quality of the banks which will substantially increase the provisioning requirement in the current financial year. Besides bad loans, restructured advances also pose a risk to the banking system."

Moreover, NPAs will go up across a wide array of sectors, which include iron and steel, textiles, power generation, automobiles and ancillaries, telecom, aviation, construction, real estate, infrastructure, steel and cement, said the survey. 

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