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A survey by the Federation of Indian Chambers of Commerce and Industry on Monday pegged economic growth at an 11-year low of 4.8 per cent in 2013-14 against five per cent in the previous year. The figure is based on a median forecast, which means half of those surveyed pegged economic growth at less than 4.8 per cent and half over that.
The World Bank had also projected India’s economy to grow at 4.8 per cent, a tad lower than Prime Minister Manmohan Singh's expectation of five per cent.
Also based on a median forecast, the economy is pegged to grow at five per cent in the third quarter, better than 4.8 per cent in the second quarter. If the economy indeed grows at five per cent, it will break a trend of sub-five per cent economic expansion witnessed for four quarters in a row till the second quarter of 2013-14.
The growth in the fourth quarter of the current financial year is projected at 5.2%.
Surprisingly, the respondents to the survey projected the RBI to raise the repo rate by 25 basis points on Tuesday, while there is a wide expectation that the central bank may go for a status quo.
" On the policy announcement, participating economists have foreseen the key policy rate to adjust at eight%, hinting towards a rise by 25 bps in January 2014," a statement by Ficci said.
This may be because the survey was carried out in November and December, when inflation data for October and November had come. While the wholesale price index-based inflation had risen to a 14-month high of 7.52% in November, its consumer price index counterpart rose to an all-time high of 11.16%.
However, in December the WPI inflation fell to a five-month low of 6.16% and the CPI rate of price rise to a three-month bottom of 9.87%. This gave rise to the expectations that RBI might hold the rates.
The timing of the survey may be a reason why economists have revised upward their projections for inflation. They pegged WPI inflation at 6.5% at the end of 2013-14 against six % projected in the previous survey.
Economists’ outlook for industrial sector remained weak for the current fiscal owing to persistent weak demand and
lackaidisical investments. The Index of Industrial Production (IIP) is estimated to grow by 1.5% in the current financial year, below 1.7% projected in the previous survey.
On the external front, situation has improved discernibly and the estimated CAD to GDP ratio has been revised downwards. The ratio is estimated at 1.9% for Q3 FY14, much lower than 4.5% estimated in the previous round.
Further, it is projected at 3% for the year 2013-14, lower than the revised target of 3.8% by the Prime Minister's Economic Advisory Council.
To carry forward this impetus and to keep CAD within manageable levels, exports need to grow at near double digits for the coming months, felt respondents to the survey. However, exports grew just in single digits in December for the second month in a row.
The present round of FICCI’s Economic Outlook Survey drew responses from economists primarily from the banking and financial services sector.
