A leading domestic rating agency India Ratings has projected a 7.7 per cent growth this fiscal driven by domestic demand. The projection is marginally low from the official growth forecast of 7.9 per cent.
"We expect GDP to grow by 7.7 per cent, up from 7.4 per cent in FY15, driven by a further pick up in private consumption demand. Consumption demand is expected to expand 8.1 per cent in FY16 against 7.1 per cent in FY15 and 6.2 per cent the year before," India Ratings said in a note. Its optimism is based on the significant moderation in inflation and inflationary expectations
According to Ind-Ra’s note, the share of private consumption in GDP is around 60 per cent. Even investment and government spending will provide adequate support to consumption-led GDP growth, it said
Despite conflicting reports of the monsoon forecast, the agency expects the agriculture to grow at 2.1 per cent under the assumption of a normal spread of monsoon in 2015. The note concedes the agricultural growth could be lower in case of a sub-normal monsoon.
According to the note, the government’s focus on 'Make in India' and 'ease of doing business' and the successful auction of coal mines may help push industrial growth to 6.5 per cent from 5.9 per cent last year on the industrial front.
The note projects WPI inflation averaging at 2.4 per cent and consumer inflation at 5.6 per cent in FY16. Retail and WPI inflation declined to 5.2 per cent and to a -2.3 per cent in March 2015, respectively.
It said soft global commodity/ crude prices, low growth in the minimum support price, lower pricing power of manufacturers and effective government intervention in the food market, would keep the inflation within the glide path of the RBI and would offset the risks on inflation following the unseasonal rains in March and an expected less-than-normal monsoons.
The report projects the benefits of lower oil prices which saved $ 60 billion in import bill last fiscal, to continue this fiscal as well. That could bring down the current account deficit for FY16 to $ 22.5 billion or 1 per cent of GDP from $ 23.1 billion in FY15 or 1.1 per cent of GDP.
The report expects the RBI to add $ 74.2 billion to the forex reserves this fiscal, putting pressure on the rupee to rise. However, it expects the rupee in the 61-64 band against the dollar.
