FE Editorial : Monsoon watch
The Financial Express: Jan 11 2013, 01:15 IST
Of all the forecasts made for economic growth in FY14, perhaps the most bullish is that made by credit rating firm Crisil which is looking at a 6.7% base case number. HSBC, by contrast has just cut its FY14 forecast from 6.9% to 6.2%; Citi is looking at a 6.2% and CLSA at an even lower 6%. While the Crisil forecast looks wildly optimistic, even after you account for the base effect of this year’s poor growth, all forecasts by analysts are predicated on a normal monsoon since it is this that will fuel consumption which, in turn, will boost industry. While Crisil is looking at a 3.5% agriculture growth number, Citi is looking at 3%—that is, a reversal to trend. This year’s poor monsoon took agriculture growth to a mere 0.6%. Crisil estimates 60% of incremental GDP will come from agriculture growth—while that number is different across analysts, all agree the bulk of the growth impetus will come from this sector. What makes Crisil’s forecast more interesting is the twist it has given to the 2014 elections and the impact of a likely pick-up in government spending as a result—40% of incremental growth in FY14, it says, will accrue from increased government spending, the impact of a cut in interest rates, and a modest recovery in exports.
Apart from agriculture, the other key variable is the rupee. While Crisil has stuck its neck out with a March FY14 forecast of R52 to the dollar, Citi is looking at 53.5
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