HSBC has cut India’s growth forecast for this financial year to 5.2 per cent from 5.7 per cent, citing insufficient progress on structural reforms and slow implementation of infrastructure investment projects.
It said the fiscal and current account deficits had turned “uglier” but the recent reform push, if sustained, should help lift growth and “beautify” the twin deficits, but it would take some time.
“We think the reform process will take time and it will likely be another three years before growth returns to eight per cent on a sustained basis,” Qu Hongbin MD and Co-head Asian Economics Research at HSBC said in a research note.
HSBC, however, lauded the government’s reforms push.
Earlier, rating agency Fitch warned of a downgrade in India’s sovereign rating in the next 12-24 months, citing slowing gross domestic product (GDP) growth and weak public finances. In April and June last year, S&P had warned of further downgrades, which would put India into a junk status from the current lowest investment grade rating of BBB-.
Meanwhile, Barclays in a report, said India’s economy was to grow at 6.6 per cent in the next financial year (FY14) on the back of expected monetary easing by Reserve Bank of India, coupled with possible policy initiatives by the government.
