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Barclays lowers India's FY14 GDP forecast

India's economic growth had slumped to a decade low of 5% in 2012-13

Press Trust of India New Delhi
Last Updated : Sep 28 2013 | 12:59 AM IST
Barclays has lowered India’s FY14 gross domestic growth (GDP) forecast for the current financial year to 4.7 per cent, saying the growth and fiscal health of the country are likely to remain under pressure, with 2014 election dynamics adding to uncertainties.

Earlier, Barclays had projected India’s growth at 5.3 per cent. India’s economic growth had slumped to decade low of five per cent in 2012-13. It had slid to 4.4 per cent during April-June quarter, the lowest in past several years, pulled down by a drop in mining and manufacturing output.      

According to the global financial services major, the broader trend in manufacturing and mining remains sluggish and the likely elevated-for-longer interest rate trajectory is also emerging as another headwind for industrial growth.

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Moreover, the country’s fiscal health is once again coming under pressure and the upcoming national elections (around April-May 2014) are another source of potential uncertainty for the economy and is likely to be a headwind against a revival of the investment cycle.      

“Taking all such factors into account, we lower our FY13-14 GDP growth forecast to 4.7 per cent,” the report said

It said after the surprise rate rise in the September policy meeting, the Reserve Bank of India is not likely to ease repo rates till the middle of next year.      “We now do not expect any easing in the repo rate until mid-2014, as opposed to our earlier expectation of that happening from December 2013,” it said.     
 
The central bank has categorically flagged that inflation is higher than its comfort level, the report added.

It said the rupee is expected to maintain a stable to positive bias in the near term, reflecting an improving current account, delayed Fed tapering and likely inflows under the FCNR scheme.      

“Over the next 6-12 months, we forecast the rupee at 61 against the US dollar; however, we note the upside risk from the stronger dollar environment that we envisage,” it said.

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First Published: Sep 28 2013 | 12:42 AM IST

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