The GDP growth for the current fiscal has been pegged lower by the Reserve Bank of India’s latest professional forecasters’ survey. It is now forecast to grow at 5.7 per cent from the 6 per cent estimated earlier.
“The Reserve Bank’s 24th Round of the Survey of Professional Forecasters expects growth to rise further to 6.5 per cent in 2014-15…Early indications for Q1 of 2013-14 suggest that the recovery is yet to shape in the economy. IIP growth stagnated during April- May 2013, recording a growth of 0.1 per cent,” the RBI said.
Meanwhile, the bank credit growth forecast for 2013-14 has also been revised downward to 15 per cent from 16 per cent in the previous round. Also, the forecast for money supply (M{-3}) has been revised downwards in 2013-14 to 13 per cent from 14.6 per cent.
Inflation and Rupee
The central bank also revised the inflation target to 5.3 per cent from the earlier target of 6.5 per cent. “Average WPI inflation is expected to moderate to 5.3 per cent during 2013-14. While the fall in headline WPI inflation affords some comfort, it is important to bring consumer price inflation under control.
However, it said that, going forward, inflation risks remain. Also, the recent rupee depreciation of about 9 per cent in Q1 of 2013-14 is likely to put some fresh pressure on domestic inflation as pass-through occurs. Fuel under-recoveries have risen sharply due to the exchange rate depreciation and domestic price rigidities, the RBI said.
Further, the RBI revised its forecast on the exchange rate for Q2 at 60 a dollar as against earlier forecast of 54.8 rupees to a dollar.
It also highlighted that given the wide current account deficit , it is important to keep fiscal deficits under check. Therefore, it is necessary to pass on increases and adjust administered prices in the energy sector, including coal and electricity.
According to the RBI, recent surveys on business expectations show that business confidence has weakened further. “However, there are emerging signs that the downturn could be getting contained. Agricultural prospects for 2013-14 are encouraging given the good monsoon so far. Revival in mining and manufacturing will take some more time but some improvement is likely later in the year,” it said.