Credit Suisse cuts India's economic growth forecast to 5.7%
Credit Suisse has lowered India's economic growth forecast for the current fiscal to 5.7 per cent, but said the economy has bottomed and will see a moderate recovery during 2013.
"We have made a small further downward adjustment to our 2012-13 GDP growth forecast to 5.7 per cent from 5.9 per cent, while opting to leave our 2013-14 forecast at 6.9 per cent,"
Credit Suisse said in a research note, adding that growth is likely to average an above-trend 7.5 per cent in 2014-15.
The three main reasons behind the cautious optimism about Indian economy include, firstly, weaker rupee which will boost net exports, secondly, the government's reforms will provide a quick boost to business confidence, and thirdly, the previous rate rises should support investment and durables consumption.
"Meanwhile, we believe the drop in market interest rates, the diminishing lagged effects of higher policy rates, the weaker rupee and the confidence-boosting effects of the government's reforms mean economic growth has bottomed,"
Credit Suisse Research Analyst Robert Prior-Wandesforde said.
A lot however depends on how effectively measures such as the opening up of the multi-brand retail sector (and others, including broadcasting, power exchanges and domestic airlines) to foreign investment are implemented, Credit Suisse said. Moreover, the moderate recovery in the economy also depends on to what extent Finance Minister P Chidambaram is able to credibly meet his ambitious medium-term fiscal consolidation plans, it added.
In October, Chidambaram had suggested a fiscal deficit of 5.3 per cent of GDP
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