A day after the International Monetary Fund (IMF), in its latest World Economic Outlook, projected an average growth rate of about 3.75 per cent in market prices for India in 2013-14, indicating tough times ahead, industry body Ficci on Thursday lowered the country’s economic growth forecast for 2013-14 to 5 per cent from 6 per cent projected in July.
“Economic growth in the current year would be restrained and we should be prepared for another year of slow growth. The median forecast for GDP growth in 2013-14 by the participating economists stands at 5 per cent,” said Ficci in its Economic Outlook survey.
It said that inflation risks have resurfaced, with headline inflation expected to be around 6 per cent by March, 2014. The rupee is expected to be in the range of 62-65 per US dollar in the near-term and elevated food prices coupled with falling rupee will put pressure on prices.
“The expectation of reduced foreign capital inflows and still high (though moderating) current account deficit (CAD) has shaped this view on the rupee movement,” the survey said adding the CAD to GDP ratio is likely to be at 4.5 per cent for Q3, FY14 and at 4 per cent for the year 2013-14.
However, it added that good monsoons, better performance of agricultural sector, improvement in exports and clearances to infrastructure projects could help in a turnaround.
The performance of the industrial sector also took a hit and economists expect the Index of Industrial Production (IIP) to grow to 1.7 per cent in FY14, which is half the 3.5 per cent growth that was projected in the previous round of the survey held in July, 2013.
Meanwhile, the trade body said Indian investors should be given alternatives to gold as a hedge against inflation. “New and stable financial products that are lucrative enough for the households to shift their savings away from gold should be provided,” it said suggesting the government should come up with more financial products like Inflation Indexed Bond (IIBs), Gold Accumulation Plan (GAP), Gold ETFs to normalise the demand for gold.
On rising NPAs of banks, it said, “If the current weak economic situation persists it will have a significant impact on the asset quality of the banks, which will substantially increase the provisioning requirement in the current financial year. Besides bad loans, restructured advances also pose a risk to the banking system.”