Policy push vital for high growth: India Ratings

To return to the higher growth trajectory, the new Government will need to push serious policy reforms, India Ratings has said.

Although, the ratings agency has kept its growth forecast for 2014-15 at 5.6 per cent, claiming that the worst is over, the Indian economy is unlikely to migrate to a high growth phase of around 9 per cent over the next two-to-three years.

It may be noted that over the weekend, Finance Secretary Arvind Mayaram had said that the economy was likely to grow at 5.5 per cent in the current fiscal.

The agency also ruled out any drastic drop in farm productivity, saying the reservoirs were already at a decadal high and it was too early to assess the likely impact of El Nino.

“Adequate water storage in major reservoirs, 25 per cent higher than last year and 37 per cent higher than the average of last 10 years, as of April 3, 2014, will cushion the adverse impact of rainfall shortage, if any,” it said, adding that this will also help in alleviating some pressure which is likely to emanate from lower-than-average seasonal rainfall.

Last week, the India Meteorological Department had said that the monsoon was expected to be below normal because of the El Nino effect. After this, the rating agency expects seasonal factors, mainly rainfall, to continue to exert pressure on inflation. However, it expects both WPI and CPI-based inflation to fall and average out at 5.5 per cent and 8 per cent, respectively, in the current fiscal.

On the mining sector, the agency said that it was recovering and was likely to reverse its trend of contraction during October-March of 2014-15. After the Supreme Court lifting the ban on iron ore mining in Karnataka and Goa, it does not expect a quantum jump in iron ore mining in the current fiscal due to depressed domestic and export demand.