India is unlikely to recover fast enough and the GDP growth will inch up to 5.6% in 2014-15 (as against 4.9% this fiscal), India Ratings said on Tuesday. The current account deficit is likely to remain low at 2.2% of GDP this fiscal and next, the agency said, while warning of some fiscal slippage despite continuing reforms.
India Ratings & Research, an unit of Fitch Ratings, expects some uptick in investment due to project clearances by the Cabinet Committee on Investment (CCI).
However, given the sluggish domestic and external environment, India Ratings said "unlike the recovery witnessed during the aftermath of the 2008 global financial crisis, the FY15 recovery is likely to be gradual. In other words, the probability of a V-shaped recovery is nearly zero."
Agricultural growth is likely to return to the trend growth rate of 3% in FY15 from the estimated 4.7% in FY14, it said, adding industrial growth may improve to 4.1% in FY15 as against 1.7% in FY14 helped by rural consumption and exports demand.
Stable agricultural growth in FY15 is likely to keep rural demand strong.
Though the outlook for the Indian economy is now looking significantly better than what it did in mid-2013, when the economy was struggling with current account and fiscal deficit, falling rupee and high and stubborn inflation, India Ratings said "better-than-expected monsoons, rising exports, swift policy as well as project clearance actions by the government and deft currency management by the Reserve Bank of India have improved business sentiments."
India Ratings expects CAD to settle at around 2.2% of the GDP in both FY14 and FY15. "This will support the rupee, which is likely to appreciate from the current levels to 56-57/dollar by end-March 2015."