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India's GDP growth rate in the current fiscal is expected to slide to 4.8 per cent and the prospects for 2014-15, which currently appear to be bright, hinge on the stability of the new government.
"We believe growth will print at 6 per cent for 2014-15, up from our 4.8 per cent estimate for 2013-14," Crisil said, adding that a normal monsoon would cushion growth and help in taming inflation.
Normal monsoons, reforms and global recovery would aid the growth process, it said, but cautioned that growth could weigh in below 5 per cent yet again if the above assumptions do not play out.
"We believe the pick-up will be aided by implementation of stalled projects, debottlenecking of the mining sector and a recovery in industry on higher external demand," Crisil said in its report 'India Economic Forecast'.
The growth rate in 2012-13 slipped to decade low of 5 per cent. The International Monetary Fund yesterday projected economy to grow at 4.6 per cent this fiscal.
Crisil said the next fiscal could be a year of new leadership and old challenges. "The outcome of general elections in May could swing the medium term growth outlook either way. Political uncertainty is, therefore, a huge weight on the economy at this juncture," it said.
It further said that while a decisive mandate can hasten reforms and resolve policy bottlenecks, a fragile political outcome, in contrast, could further delay long-pending critical reforms and will completely dent investment sentiment and derail growth.
Crisil said there is little scope for monetary policy to boost growth in 2014-15 and recovery in investments would be largely driven by clearance of stalled projects.
It forecast the average WPI inflation at 6.2 per cent in current year and fiscal deficit to be at 5 per cent.
"We do not envision a sharp pick-up in private corporate sector investments in manufacturing during 2014-15 as capacity utilisation rates are very low in most industries," it said.
New projects can hit the ground only in 2015-16 and only if there is a stable policy environment after the elections along with a sustainable recovery in demand, it added.
On the sharp reduction in Current Account Deficit this year, Crisil said the nature of improvement is unsustainable. The government expects CAD to come down to USD 50 billion this fiscal, from USD 88.2 billion in 2012-13.
"As and when the curbs on gold import are gradually removed, import demand is likely escalate once again. As the economy recovers, investment and consumption goods¿ imports will pick-up. A pick-up in domestic growth is also expected to push oil imports higher due to higher volume demand," it said.