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A day after many economists pegged India’s economic growth for the fourth quarter of 2012-13 at below 5% level, rating agency Icra Limited today predicted the GDP expansion to be 5% from 4.5% in the third quarter.
Yesterday, economists cited the reason for a relatively lower GDP to a reduction in government spending. The economists included Credit Suisse Director and Chief Economist Robert Prior-Wandesforde and Nomura India chief economist Sonal Verma.
However, Icra predicted a slight improvement in the growth of services and agriculture which will reflect in the economic growth.
“Lead indicators of the services sector suggest a small uptick in growth in the fourth quarter”, the agency said.
Giving thumbs up to the reform measures announced by the government to ease the widening current account deficit, Icra Limited - India's leading rating agency - has forecast a marginal 0.5% decline in current account deficit (CAD) in the current fiscal year from expected five% in 2012-13. It, however, said even 0.5% lower CAD would be a high number.
It said CAD may still remain a key area of concern for the Reserve Bank of India despite a predicted fall in the figures.
"Macroeconomic and political uncertainties may result in sporadic portfolio outflows and foreign direct investment (FDI) inflows may not record a broad-based pickup until after the Parliamentary elections", the agency said.
Icra suggested a cautious approach towards monetary easing to ease down the current account deficit. "CAD is expected to remain uncomfortably large, despite the anticipated reduction in FY14. Accordingly, a cautious approach towards monetary easing is warranted", the rating agency said.
Icra expected lower CAD due to "the expectation that incentives announced by the Government would provide a limited boost to non-oil, non-jewellery merchandise exports and lower crude oil prices would dampen growth of oil imports”.
Further, owing to a favourable monsoon forecast, the agency said that inflation is also likely to ease down in 2013-14.
"Food inflation will go down to 6.5-7.0% in 2013-14 from around 10% in 2012-13. Moderation in prices of some industrial inputs and weakening pricing power will lead to moderate core inflation at 3.5-4% over the first half of the next financial year", said Icra Ltd.
The government is expected to announce the GDP numbers for 2012-13 on May 31, while CAD numbers for the year would come on June 28.
