Despite the weak monsoons, the Indian economy is expected to grow faster than earlier estimates, a survey of professional forecasters conducted by the Reserve Bank of India revealed.
In a report released by the central bank ahead of the first-quarter review of the monetary policy tomorrow, RBI said surveys conducted by it and other agencies are pointing to a return to optimism.
The professional forecasters’ survey was a case in point, with the economy projected to grow by 6.5 per cent during the current financial year against 5.7 per cent forecast earlier and a 6.7 per cent in 2008-09. Next year, the growth rate could rise to 7.5 per cent, the survey conducted in April-May estimated.
| ‘SEE’ CHANGE Median forecast by professional forecasters | |||
| 2008-09 Actual | Previous | 2009-10 Latest | |
| Inflation | 8.4 | 1.8 | 1.6 |
| GDP | 6.7 | 5.7 | 6.5 |
| Agriculture | 1.6 | 3.0 | 2.5 |
| Industry | 2.6 | 4.1 | 4.8 |
| Services | 9.4 | 7.5 | 8.3 |
| GDS | NA | 34.6 | 35.0 |
| GDCF | NA | 35.4 | 36.6 |
| Corporate PAT | NA | 9.0 | 7.5 |
| NA: Not available; GDP: Gross domestic product; GDS: Gross domestic savings (as % of GDP); GDCF: Gross domestic capital formation (as % of GDP); PAT: Profit after tax Data on agriculture, industry, services, GDP and corporate PAT are growth rate in %. The previous estimates was based on the survey for quarter-ended March 2009, while the latest results are based on the survey for the quarter-ended June 2009 Source: RBI | |||
Just as in the boom years, it was services and industry that were responsible for the higher projection, while the monsoon-dependent agriculture sector was expected to see a moderation in growth (see table).
In addition, the survey projected that both exports and imports are expected to contract in the current financial year by 0.5 per cent and 3.5 per cent respectively. Though a decline is forecast, the situation appeared to be better earlier estimates.
In line with past practice, RBI reserved its assessment of the economic situation for tomorrow but it did list out the positives and negatives.
The dampeners included a delayed arrival of monsoon in certain parts of the country, which has already affected sowing. Besides, RBI said the persistence of global recession meant weak prospects for exports.
The decline in non-oil imports at an accelerating pace also did not augur well for the economy, it added. Further, during April-May, there was a decline in the capital goods segment of the index of industrial production and commercial vehicle production also fell.
The central bank also pointed out that during the first quarter of the current financial year, the growth of the services sector could have been affected by the lagged impact of the decline in manufacturing sector growth during January-March.
Overall, however, there appeared to be more good news than bad, starting with the manufacturing sector.
RBI pointed out to the growth in industrial output, core infrastructure sector and a pick-up in construction that was reflected though significantly higher cement production. Besides, RBI pointed out that during June, tourist arrival and rail freight earnings improved, while there was a growth in new mobile phone connections during April and May.
In terms of financial sector indicators, the central bank said that non-food credit growth had started to turn towards the end of the first quarter.
Similarly, after two consecutive quarters of net outflows in the second half of 2008-09, there was an improvement during April-June 2009. Also, the stock markets witnessed a significant recovery, while there were also signs of revival in the primary markets.
Besides, RBI pointed to the results of two surveys conducted by it – the Survey of Professional Forecaster and the Industrial Outlook Survey. The latter revealed a reversal in sentiments in manufacturing companies in the private sector on indicators such as production, order book position, capacity utilization and the financial situation.
Compared to the first quarter, there were at least twice as many respondents who said the overall business situation was better, though the proportion of those who said there was no change over the previous quarter was roughly the same.
The other good news was the expectation of the manufacturing sector being a net hirer during the second quarter for the current financial year.
In terms of industry groups, fertiliser, food products, and pharmaceuticals revealed positive sentiments.
