New Delhi, 16 July
Bank of America Merill Lynch (BofA-ML) today lowered India’s GDP growth forecast to 5.5 per cent for this fiscal from 5.8 per cent earlier, as the Reserve Bank’s tightening measure is likely to push back lending rate cuts.
“We have cut our financial year 2014 growth forecast to 5.5 per cent from 5.8 per cent earlier as the RBI’s tightening will push back lending rate cuts,” BofA-ML said in a research note today.
The global brokerage firm in March had trimmed the growth forecast to six per cent and in June again it revised the growth estimate to 5.8 per cent.
“We had earlier expected growth to stage a shallow recovery to 5.8 per cent on the back of better rains and lending rate cuts,” BofA-ML said, adding: “We have now removed the 30 bps (0.3 per cent) we had expected from softer rates.”
In a move to stem the continuing fall of rupee, the RBI last night came out with a slew of measures, including hiking the lending rates for banks and sucking up of Rs 12,000 crore.
According to the global brokerage, the steps taken by the RBI yesterday are likely to push back softening of interest rates.
“We expect the RBI to cut rates by 25 bps (0.25 per cent) each in October and January, skipping September,” BofA-ML said.