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Striking a positive but not so bullish tone, BNP Paribas has kept its India GDP growth forecast unchanged at 5.4 per cent for the current fiscal.
Gross domestic product (GDP) growth is likely to track in a 5-5.5 per cent range in the next few quarters given the short-term pressures on public sector spending and agricultural output (worth a combined 26.8 per cent of GDP).
Growth momentum was unlikely to improve given the headwinds of deficient monsoon and little scope for monetary and fiscal stimulus, Richard Iley, Chief Asia Economist, BNP Paribas, said in a note after the release of first quarter GDP numbers.
The first quarter GDP growth of 5.7 per cent – a two-year high – is probably the best India can hope to sustain for the foreseeable future, the note said.
Reviving manufacturing output, buoyant financial services and pre-election Government spending were the drivers for this first quarter growth performance.
Improvement in economic growth to 6 per cent or above in 2015-16 depends on the Government’s willingness and ability to deliver on structural reforms, Iley said.
Looking forward Stating that growth pick-up was built upon relatively narrow foundations, BNP Paribas sees little near-term prospect of any further acceleration in India’s GDP.
Long-term revival in manufacturing needs a shift in policy mix – looser monetary policy and decisively tighter fiscal policy, the research note has said.
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