An 'incipient recovery' is round the corner for the Indian economy and it is expected to clock a GDP growth rate of 5.5 per cent in the first quarter of the current fiscal amid signs of improved sentiment on consumer spending and the monsoon, says a report.
As various macro-economic indicators ranging from inflation to external sector are showing positive signs, "an incipient recovery is round the corner", said the SBI research report.
On inflation, it said the expected trajectory for the Consumer Price Index would be "benign" and the average CPI for FY15 would be no more than 7.5 per cent.
"CPI is likely to breach 7 per cent in August, 6.5 per cent in September and 6 per cent in October. Moreover, even though the retail CPI numbers will accelerate after November the average CPI for FY15 will be no more than 7.5 per cent," the report said.
The Index of Industrial Production is also showing an upward trend and may cross 5 per cent, with visible recovery in passenger car sales and strong growth in exports, the report said, adding that there is also an improved sentiment on the consumer spending.
The monsoon rains are also recovering fast and their revival in the grain bowl of Northwest and Central regions of India will help speed up sowing of main summer crops such as rice, corn, soybean and cotton.
"With monsoon rains fast recovering, our first quarter GDP growth estimates is now trending at close to the median estimate for FY15 at 5.5 per cent" the report said.
The new government's focus on infrastructure, will possibly led to a faster growth in productivity rather than consumption. This will help in a lower and stable inflation regime and better GDP numbers, it added.
On the external side, the report said that after hovering in the negative territory for the last 12 consecutive months, the country's import figures recorded a positive growth in June 2014 and is likely to be in the positive territory in coming months also.
India's exports are expected to rise 12-13 per cent in the second quarter of the current financial year, 2014-15, it added.
