The fears on inflation are overdone as the fall in prices of onions and tomatoes suggests the same, says a report released by Bank of America Meryll Lynch. In addition, Indian economy will grow at 7.5 percent level in the first half on a lower base, but will fall down to 7 percent in the second half of the next fiscal, says Bank of America Meryll Lynch. Even with the jump, it will continue to trend 1 percentage point lower than the potential growth of the economy, analysts at the Bank of America Meryll Lynch said in a report today. “Although growth will pick up to 7.5 percent in the April-September quarters, on base effects of note-ban/GST in FY18, it should slip to 7 percent in second half of FY19.
Even so, we point out that growth will still be 1 percentage point below our estimated 7 per cent potential in the old GDP series,” it added. The government is expecting growth to rise to 7-7.5 percent in the next fiscal. Generally, a rate cut is seen as a measure to boost growth but with price rise risks firming up, many observers wonder if the central bank would be able to deliver the rate cut given its medium term inflation target of 4 per cent.
Meanwhile, the last Budget of the current government ahead of the General Elections in 2019, was touted as pro-farmer and pro-poor Budget, Credit rating agency Moody’s has said that the Budget will benefit the corporate, infrastructure and insurance sector, and that slight fiscal slippage has no material impact on the country’s overall fiscal strength.
Moody’s lauded the government’s huge allocation in the infrastructure sector, saying that it will benefit from the boost in spending, and the continued focus on public investment will also help “galvanise India’s upturn in capital spending”. The Narendra Modi government allocated highest ever funds to the Railways and increased the overall infrastructure funding by over 20% from the previous year. The Railways received a total funding of Rs 1.49 lakh crore, up from previous fiscal year’s Rs 1.31 lakh crore, while the total allocation for the roads sector was up by 6.7% to Rs 89,544 crore from Rs 83,900 crore in the previous year.
With PTI inputs