Will miss govt's advance estimate by a whisker: India Ratings

Estimates the country's economic growth at 7.3% for 2014-15, slightly lower than the government's advance estimate of 7.4%

India Ratings & Research, estimates the country's economic growth at 7.3 per cent for 2014-15, slightly lower than the government's advance estimate of 7.4 per cent.

The economy expanded 6.9 per cent in 2013-14 and 5.1 per cent the previous year."Growth of 7.3 per cent represents gradual economic recovery," said Devendra Pant, chief economist with India Ratings.

The Mumbai-headquartered entity is part of the America-based Fitch Group.

 

Official gross domestic product (GDP) data for 2014-15 are slated to be out on Friday.  While slightly better performance  on exports (both merchandise and services) compared to what was projected in the advance estimate would boost growth, lower private and  government final consumption expenditure would pull it down.  Gross fixed capital formation, a proxy for investment, was projected by India Ratings to be 5.1 per cent in 2014-15, the same as estimated earlier.  However, it did not believe that private  final consumption expenditure growth would be  7.1 per cent in 2014-15, as pegged by the advance estimate. To grow this much, it had to expand 11.8 per cent in the financial year's fourth quarter (January-March), a daunting task, it said.

Consumer expenditure, which reflects demand in the economy, has refused to perk by much, despite low inflation adding to real income of people. "...consumers are still cautious and somewhat sceptical about sustainability of the trajectory of inflation decline. They are in a wait and watch mode and deferring their spending," the rating agency said.

 

Growth in government expenditure was pegged at 10 per cent in FY15 in the advance estimate but India Ratings said this would require the outlay to rise 10.8 per cent in the fourth quarter, which seemed not likely, given the focus on fiscal consolidation. It estimated the expenditure to grow 9.6 per cent in the year.

The agency also said it expected net exports to grow in the fourth quarter, instead of contracting as calculated in the advance estimate. This would have a positive impact on overall GDP growth. Segment-wise, the rating agency did not expect industry  to have grown 5.9 per cent in the year as had been calculated by the advance estimate. It outs this at 5.4 per cent.

However, it pegged services sector growth at 10.5 per cent, close to the 10.6 per cent  in the advance estimate. And, agriculture expansion at 1.1 per cent, the same as was calculated by the Central Statistics Office.