International research agency Nomura has scaled up India’s growth projection for 2014-15 to 6 per cent from 5 per cent earlier, on the back of the Government’s attempts to resolve policy bottlenecks as well as improved investor sentiments.
The new projection is higher than Finance Secretary Arvind Mayaram’s latest estimate of 5.8 per cent and Reserve Bank of India’s projection of 5.5 per cent. The Government is scheduled to release growth estimate for the first quarter of the current fiscal on August 29. The agency has upped the projection for the April-June quarter to 5.9 per cent from its earlier estimate of 4.7 per cent.
“Monsoons will be a drag on agriculture in FY15, but non-agriculture growth is rising at a faster pace than we had expected,” Sonal Varma and Aman Mohunta of Nomura said in a note on India.
“We are seeing a broad-based revival. We expect this momentum to continue as the Government is proactively resolving investment backlogs,” the note said.
It also added that the OECD’s composite leading index for India, which has a six-eight month lead on industrial production (IP) growth, suggests that IP could clock close to double-digit growth rates towards the end of this fiscal year.
Fresh capital expenditure It has expected the economy to fire on all cylinders in 2015-16 with a pick-up in private consumption, investment and export demand. “The first leg of the investment cycle will be driven by the Government’s efforts on unclogging the investment pipeline.
As capacity utilisation rises and demand is sustained, we expect firms to undertake fresh capital expenditure, constituting the second leg of the investment cycle,” the note said.
However, there are some risks, but these are global in nature.
For example, there is apprehension of global growth slowing down besides higher crude prices.
It is also important to note that with interest rates going up in the US, there could be sharp reversal of capital inflow.