statesman news service
New Delhi, 21 July
Presenting a moderately optimistic outlook for financial year 2013-14, industry body Ficci predicts a growth rate of around six per cent for this fiscal.
The industry lobby also forecast a growth rate of five per cent for the first quarter of the ongoing financial year in its latest economic survey.
The respondents to the survey indicated that the position with regard to inflation will remain favourable going ahead as price levels are expected to remain subdued. Currency volatility could have an adverse impact though, the survey said.
Some grave concerns remain and these would have to be handled promptly to get economy back on growth trajectory. Passive industrial performance, elevated current account deficit and a depreciating rupee might dampen growth prospects if adequate supportive action is not taken, it said.
However, the performance of the industrial sector is expected to see some uptick and a somewhat better performance than last year is foreseen. Respondents expect IIP to grow at a moderately faster pace of 3.3 per cent in FY’14 vis-à-vis 1.1 per cent growth witnessed last year.
Further, the survey results indicate that a cut in key policy rate would be crucial for getting growth back on track. A majority of the participating economists anticipated a 50 to 75 bps cut in repo rate by end of this fiscal year. The respondents would like to see repo rate by end of this fiscal at 6.50-6.75 per cent.
The participants said a fall in repo rate will give elbow room for banks to reduce deposits as well as lending rates. It was pointed out that though 125 bps worth of rate cuts have already taken place since April 2012, lending rates have not come down commensurately. It is imperative to reinforce monetary transmission.
On the divergence between WPI and CPI, it was felt that this could be bridged only by creating efficient supply chains and monetary policy has little do with it.
On the current account deficit (CAD), it was reported that depreciating rupee will add to the burden and even out steps taken by the government to curb gold import demand.