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Economist, Moody's project higher growth for India
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SME Times News Bureau | 18 Apr, 2015
The bullish projections for the Indian economy continue. A week after it
revised its outlook on India to positive from stable, global ratings
major Moody's pegged the country's growth at 7.5 percent for 2015, while
the Economist Intelligence Unit said a 7.1 percent expansion will be
sustained over the next four years.
"India's economy is on a
cyclical upswing. Forward looking indicators suggest domestic demand is
gathering momentum," said Faraz Syed, associate economist, Moody's
Analytics, on Friday.
According to the ratings agency, low
inflation rate has enabled the Reserve Bank of India (RBI) to cut
interest rates by 50 basis points in early 2015 which has helped in
easing pressure on the private sector.
"Lower rates as well as
the government's infrastructure and disinvestment programs should
provide a boost to domestic-oriented industries," said Syed.
The RBI had cut its repurchase rate by 25 basis points on January 15 and on March 4.
However,
RBI Governor Raghuram Rajan, who conducted the first bi-monthly review
of the monetary policy for the current fiscal year on April 7, decided
to retain the policy rates.
The RBI made it clear that it will
cut interest rates further only if it sees more robust containment of
prices and commercial banks lowering the cost of housing, auto and
corporate loans.
"Since most banks didn't reduce their lending
rates until recently, the full impact of the rate cuts will probably be
felt in the second half of 2015. Thus, consumer spending likely will get
a bigger boost later this year," Syed said.
Rajan has projected a 7.8 percent growth for the current fiscal year, subject to a normal monsoon.
The
Economist Intelligence Unit's (EIU) latest global forecast has pegged
India's growth annual growth to clock 7.1 percent over the next four
years.
It said that the Indian economy is strengthening, off the
back of lower oil prices, which has eased structural problems with high
inflation.
"In its first full budget, for fiscal year 2015-16
(April-March), the government pledged more money for much-needed roads
and railways and cut some red tape for entrepreneurs," EIU's global
forecast said.
"It (government) relaxed slightly some fiscal
deficit targets and increased spending on welfare. All of these moves
are positive, but are no more than incremental improvements," the
forecast added.
Meanwhile, Moody's analysis further suggested
that the country's first quarter GDP (gross domestic product) growth
will be around 7.3 percent on a year-on-year basis.
The growth
projections come soon after Moody's had revised India's sovereign
ratings outlook to positive from stable. Another ratings agency Fitch
had reaffirmed its stable outlook on India.
The think-tank of
rich nations, the Organisation for Economic Cooperation and Development
(OECD), also endorsed high growth prospects for India.
Similarly,
the Asian Development Bank (ADB) has also projected the country's
growth at 7.8 percent in 2015-16 and at 8.2 percent in 2016-17.
On April 14, the World Bank had forecast India's growth accelerating to 8 percent in the next fiscal.
The
ratings agency further noted the government's disinvestment plans as
being a significant instrument in raising funds for infrastructure
creation.
"Funds raised from disinvestments will be spent on
developing India's ailing infrastructure. If revenues fall short, we
expect the government to cut expenditure to meet its 3.9 percent deficit
target for 2015-2016," Syed said.
"Lower government spending is a downside risk to our forecast over the coming year," Syed added.
For 2015-16 fiscal beginning April, the government has budgeted to collect Rs.69,500 crore through public sector disinvestment.
Recently,
approximately 5 percent of the Rural Electrification Corp. was sold in
early April. The share issue stood oversubscribed by 553 percent.
Moody's
said that the India's current account deficit (CAD) is expected to
remain steady in 2015 thanks to lower oil and gold prices.
India's
CAD came down to $8.2 billion -- or 1.6 percent of the gross domestic
product -- in the third quarter ended December 2014.
With the
steep fall in oil prices the subsidy burden has been projected to come
down from a high of Rs.1.39 lakh crore for 2013-14 to around Rs.80,000
crore in 2014-15.
EIU's forecast gave a similar view on benefit of lower crude oil prices for the Indian economy and the Indian currency.
"Oil
will continue to exert an influence over emerging-market currencies:
those of large producers such as Russia have suffered significant
depreciations, while those of importers such as India have shown much
more resilience," the EIU's forecast added.
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Customs Exchange Rates |
Currency |
Import |
Export |
US Dollar
|
66.20
|
64.50 |
UK Pound
|
87.50
|
84.65 |
Euro
|
78.25
|
75.65 |
Japanese
Yen |
58.85 |
56.85 |
As on 13 Aug, 2022 |
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