Strengthening of reform momentum may support a revival in investment activity and consumption sentiment
ICRA expects a strengthening of the reform momentum by the Government may support a nascent revival in investment activity and consumption sentiment in the latter part of this fiscal year, boosting GDP growth in Q4FY15. Overall, ICRA expects GDP growth to improve to 5.3-5.5% in 2014-15 from 4.7% in 2013-14.However, ICRA cautions that GDP growth would be subdued in H2CY14 on account of a mild drag imposed by an inferior agricultural performance, subdued consumption demand and low hydroelectricity generation following the sub-par monsoon. In addition, a likely moderation in rise of exports would dampen GDP growth in the remainder of 2014-15.
Agricultural growth in 2014-15 is expected to range between 0.5-1.5%, with a weak performance in H2CY14 reflecting the unfavourable monsoon and delayed kharif sowing. As a result, rural consumer sentiment is expected to be subdued, notwithstanding income support programs such as NREGA. Additionally, elevated inflation (albeit lower than the levels seen in 2013-14) and sticky interest rates are expected to limit the improvement in urban consumption demand in the near term.
However, certain sectors like passenger vehicles and commercial vehicles are likely to record a positive growth in FY15 given the pent up demand following the sustained contraction in FY14. Moreover, the contraction in gems & jewellery output would ease in FY15, benefitting from the base effect. On balance, we expect a mild improvement in manufacturing growth in FY15, following the contraction in FY14.
Powered by Capital Market - Live News
