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The Indian economy is expected to grow at a rate of 6.7 per cent in 2013-14 fiscal on account of expectations of cut in key policy rates by the RBI which may have a positive impact on industrial growth and consumption, a FICCI survey said.
The chamber has revised its growth forecast upwards from 6.5 per cent to 6.7 per cent for the 2013-14 fiscal.
“This improvement is largely based on the expectations of a possible cut in policy rates which is expected to have a positive impact on industrial growth and consumption,” FICCI’s Economic Outlook Survey said.
“The revival in sentiment reflects cautious optimism and is an indication of improved sentiment post September 2012 mainly due to the Government’s renewed thrust to the reforms agenda”, FICCI President Naina Lal Kidwai said in a statement.
Policy rate cut
It said India Inc is expecting a repo rate and CRR cut of 0.25-0.5 per cent each in the forthcoming review of the monetary policy scheduled on January 29.
A majority also felt that a reduction of 0.75 to 1 per cent in repo rate through FY’14 is more likely. This is critical for revival of growth, it said.
“The possibility of the RBI cutting rates will provide industry a fresh dose of oxygen and along with the expected US recovery, will breathe some life back into industry,” Kidwai said, adding “With inflation risk receding, there is indeed some scope for easing in the forthcoming monetary policy.’’
The inflation based on wholesale price index declined to a three-year low of 7.18 per cent in December.
Fiscal deficit
On fiscal deficit, she said that if the recommendations regarding the roadmap on fiscal consolidation made in the Kelkar report are carried forward, “we would soon be moving on the right track’’.
However, she added that ballooning current account deficit remains a constraint on monetary policy easing.
“With exports witnessing a decline and global demand likely to remain flat in the near term, it will be vital to extend support to the labour-intensive export-oriented units,” Kidwai said.
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