India is likely to clock economic growth rate of 5.5 per cent in the current financial year, which would accelerate to 6.5 per cent in 2013-14, driven by demand in domestic consumption.
According to a DSP BlackRock Mutual Fund Economy and market outlook for 2013, in the next fiscal (April 2013-March 2014), economic growth is likely to accelerate to 6.5 per cent (from 5.5 per cent expected for FY'13).
"Continued strength in domestic consumption demand, further bolstered by the direct transfer of subsidies, together with a revival of the investment spending cycle led by public sector enterprises, will likely contribute to this increase in economic growth," DSP BlackRock Mutual Fund President & CIO S Naganath said.
DSP BlackRock MF lauded the reform measures taken by the government since mid-September and said that the direct subsidies transfer to the intended beneficiaries, is likely to improve the efficiency of distribution significantly.
It said the Aadhar initiative, if implemented well, could result in huge efficiency gains, the report said, adding that this could contribute to an increase in consumption demand, especially from rural areas.
Subsidies today account for nearly 1.8 per cent (around Rs 1.7 lakh crores) of the annual budget. The subsidy bill may decline significantly if efficiency in distribution improves significantly.
Moreover, the Cabinet Committee of Investments (CCI), which was set up for speedy approval of various projects that are awaiting clearances, would boost investment and add to the pace of growth in the economy.
"We anticipate private sector investment spending to gather momentum in FY 2015 and FY 2016. This, we believe could accelerate growth to 7-8 per cent in the medium term," the report said.
Market sentiment turned around remarkably after the government initiated a series of reform measures that were aimed at accelerating economic growth and dispelling the
negative investor sentiment clouding the market and, going forward, the outlook looks bright.
"We think Indian equities offer an attractive investment opportunity today for investors with a 12-24 month investment horizon," the report added.
India had been growing around 8-9 per cent before the global financial meltdown in 2008. The growth rate in 2011-12 slipped to a nine-year low of 6.5 per cent.
According to the official data, the Indian economy grew by 5.3 per cent in the July-September period this year, while in the quarter ended June 30, it had grown by 5.5 per cent.