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growth in exports. For FY2015, from a BOP perspective, we expect exports growth of 4.5% and non-oil imports growth of 3%, implying a trade deficit of US$142 bn (Exhibit 2).
5. IIP grows marginally—against expectation
IIP grew 0.1% in January after (-)0.2% revised print for December. Sector-wise, mining grew 0.7% while manufacturing contracted for the fourth consecutive month at (-)0.7%. On the use-based side, consumer durables have shown contraction for the past 14 months and continued to disappoint with contraction of 8.3% in January. However, on a mom basis it showed a strong growth of ~14% after contraction of 2.8% in December. Consumer nondurable growth was positive at 4.4%, leading to the overall consumer goods segment witnessing a growth of (-)0.6%. As expected, the investment cycle remained weak with the capital goods contracting by 4.2%.
6. April 1: Status quo on rates by RBI, no change in stance
RBI had indicated that “further policy tightening in the near term is not anticipated at this juncture” if the anticipated disinflationary process evolves as expected. The inflation trajectory remains on track to soften to 8% by January 2015. However, core inflation has remained sticky implying that chances of demand-led inflationary pressures are still high. Our output gap estimate hints that even with the anticipated marginal growth pick-up, inflationary pressures can be significant. RBI will likely be mindful of this and hence we expect the RBI to maintain a status quo on rates at its next policy meeting on April 1, with the communication remaining balanced. Our base-case scenario remains an extended pause for most of CY2014.
Indranil Pan, Chief Economist, Kotak Mahindra Bank