RBI likely to cut repo rate by 25 bps, says Icra

On the credit growth, Icra said it is likely to be around 14.5 per cent to 15.5 per cent in FY13, lower than the RBI forecast of 16 per cent. In this perspective, it said banks are likely to lower lending rates as policy rates ease in Q4 of of this fiscal. On the inflation, Icra said core inflation may display an uptick following the Government's decision to allow full deregulation of diesel to bulk consumers and partial deregulation to retail consumers.

It said higher prices of perishable foods following the below average temperature in the North are expected to add to inflationary pressure in January.

Merchandise and services exports are likely to be weak due to insufficient supply of electricity in parts of the country combined with slowdown in global economy.

"Factoring in average inflation of around 7.5 per cent in 2012-13 and monetary easing of around 50 bps in Q4, we expect GDP growth to ease to 5.4 per cent this fiscal from 6.5 per cent last fiscal," the report said, adding the medium-term outlook remains favourable for growth.

On the external commercial borrowing front, the report said the rupee volatility and the anticipated softening of domestic borrowing costs were likely to limit the attractiveness of ECBs in the ensuing quarter.

The rating agency also said the domestic bond yields are expected to remain attractive to the investors in

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