Goldman Sachs has predicted a 5 per cent growth in the country's gross domestic product growth during the current financial year, saying that the official forecast of 6.5-7 per cent is `optimistic'.
In its latest `Asia Economics Analyst' report, the investment bank has said an inflation target of 5 per cent and an M3 expansion of 15-15.5 per cent set up for fairly easy monetary conditions.
"The fiscal deficit of 6 per cent of GDP for the current fiscal year means essentially no change from the 1997-98 outcome. This is bad news for long-term GDP growth but probably realistic, given the coalition nature of the government. This means the budget due out on June 1 is unlikely to have many surprises."
It expressed concern over the export performance implied in the cuts in refinance rates and in the increase in the proportion of export finance that the RBI would refinance.
The analysis added that this supports its view that the rupee would weaken.
But the credit policy was more or less in line with market expectations; the only surprise was a failure to cut the cash reserve requirement and the fixed possession rate, it said.
