Industry chamber FICCI’s Economic Outlook Survey has raised growth expectations to 6.7 per cent for fiscal 2013-14. In September 2012, the projection was 6.5 per cent.
Releasing the results of the latest round of survey, the chamber said this improvement was largely based on expectations of a possible rate cut by the Reserve Bank of India, which is likely to have a positive impact on industrial growth and consumption. There has not been rate cut since April last year and there is huge expectation that RBI may lower the rates on January 29.
Echoing market sentiment, respondents in the survey expected a repo rate cut of 25-50 basis points (bps). Along with this, a quarter of the total respondents expected a cash reserve ratio rate cut of 25-50 bps. A majority also felt that a reduction of 75 bps to 100 bps in the repo rate through FY14 was more likely. This was critical for revival of growth, the survey said.
FICCI’s President, Naina Lal Kidwai, believes, “The possibility of RBI cutting rates will provide industry a fresh dose of oxygen and along with the expected US recovery, will breathe some life back into industry.”
With the inflation risk receding (core inflation was at a 36-month low in December 2012), there is indeed some scope for easing the forthcoming monetary policy, she added.
The Government has targeted bringing the fiscal deficit to 4.8 per cent in 2013-14. However, the survey felt that this could be at 5.1 per cent. Kidwai suggested that the process of fiscal consolidation should be pursued in right earnest.
“If the recommendations regarding the roadmap on fiscal consolidation made in the Kelkar report are carried forward, we would soon be moving on the right track,” Kidwai said.
Most of the respondents expected the current account deficit to be not less than four per cent of GDP for FY14.
“The wide current account deficit remains a constraint on monetary policy easing,” Kidwai said.
With exports witnessing a decline for the eighth consecutive month and global demand likely to remain flat in the near term, it is vital to extend support to labour-intensive export-oriented units.