Reforms, actionable policies and cut in rates key to economic growth
GN Bureau | April 14, 2015
India's economic growth is expected to improve to 7.9 per cent in current fiscal year. This figure has been given by global rating agency Crisil and foreign brokerage Morgan Stanley in their reports.
The projection is lower than 8-8.5 per cent GDP growth forecast by the government for 2015-16. Indian economy grew at 7.4 per cent in 2014-15 and 6.9 per cent in 2013-14.
Meanwhile, India’s retail inflation surprisingly eased in March to a three-month low as food prices softened, despite the damage to spring harvest in more than 14 states following unseasonal rainfall.
In its report, titled 'India's Economy is on the Mend, but Corporations Remain Wary', Crisil said the growth prospects "appear brighter", particularly among emerging markets.
"Crisil forecasts India's GDP growth to increase to 7.9 per cent in fiscal year 2016. Our projections are based on falling inflation, declining interest rates, and our expectation of a healthy monsoon this year," said D K Joshi, chief economist of Crisil.
Foreign brokerage Morgan Stanley also said that country's economy will grow at 7.9 per cent this fiscal year and 8.4 per cent in FY17, on the back of policy reforms, a spurt in domestic demand and lower inflation.
The investment cycle is yet to show any signs of pickup and high non-performing assets in the banking sector foster risk aversion and mute monetary transmission and credit growth, Crisil said. "Therefore, it is important for India to stay the course of economic reform and renewed growth and to get the private corporate sector to join in the journey," it added.
Crisil said economy has been on a gradual uptrend since May last year but the country's corporate sector remains in a wait-and-see mode before committing to significant new investments. It said consumer and business sentiment has improved, the government's reforms agenda is strong, and global crude oil prices have fallen.
Morgan Stanley in its report said "the government's determined efforts to implement policy actions to improve the growth mix, i.e. reviving productive investment and cutting back less effective redistributive policies, are helping the economy move towards the path of faster growth and lower inflation."
Under the new growth computation methodology, the GDP expansion at market prices will go up to 7.9 per cent in FY16 and accelerate further to 8.4 per cent in FY17, it said.
Stating that the risk to the growth forecasts are "evenly balanced", it said the pace of policy actions to revive productivity dynamic, strength of external demand recovery and trend in capital inflows into emerging markets are the key factors to monitor.
On inflation, it said that the retail price will come below 5 per cent, which will create more room for the RBI for rate cuts to push growth.
And there was movement on the inflation front. While the rural retail inflation rate slowed to 5.58% in March from 5.79% a month ago, the urban retail inflation rate eased to 4.75% in March from 4.95% in February. Retail prices rose 5.17% in March, slower than a 5.37% increase in the preceding month, the ministry of statistics said on Monday. Food inflation slowed to 6.14% in March from 6.88% a month ago.
This raises hopes of further monetary easing by the central bank in its next policy review in June.
India’s factory output accelerated to a three-month high at 5% in February against 2.8% a month ago and car sales grew for the first time in three years in March, signalling a sustained turnaround in the industrial activities in the country, after prime minister Narendra Modi government took charge at the centre 11 months ago.
Rating agencies have also been upbeat about India recently, with Moody’s Investors Service Inc. upgrading India’s credit rating outlook to ‘positive’ from ‘stable’, while its peer Fitch kept the outlook unchanged at ‘stable’.
Fire on the Ganges: Life among the Dead in Banaras By Radhika Iyengar 4th Estate / HarperCollins, 348 pages, 599
Calling for reforms in the Engineering Department of BMC, Mumbai Vikas Samiti, a not-for-profit organisation has said that less than optimum performance of Engineering Function has added to the woes of citizens and deterioration in the quality of life in the metro. In its recently released r
Hailing the Maharashtra government for introducing a bill to amend the Insecticide Act, 1968, Pesticide Action Network (PAN) India has called the amendments ‘very focussed’ and urged the state to expand their scope to address other challenges. The bill, introduced in the a
`Garba of Gujarat` has been inscribed in the Representative List of Intangible Cultural Heritage (ICH) of Humanity by UNESCO, under the provisions of the 2003 Convention for the Safeguarding of Intangible Cultural Heritage during the 18th meeting of the Intergovernmental Committee for the Safeguarding of t
Since its inception, Citizen Financial Cyber Fraud Reporting and Management System has witnessed more than 12.77 lakh complaints registered (till November 15, 2023), and has saved more than Rs. 930 crore in more than 3.80 lakh complaints. This was stated by minister of state for home affair
Impacts and implications of Climate Change Vulnerability in the Himalayan Region and ways of creating ‘Climate Resilient Development in Indian Himalayan Region by making mountain communities green and resilient were discussed the side event hosted at the India pavilion at the UN Climate Conference CO