Strong reforms must to pull economy out of morass: India Ratings

Apr 28 2014, 21:16 IST
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Indian Ratings has kept its FY15 growth forecast unchanged at 5.6 per cent. Reuters Indian Ratings has kept its FY15 growth forecast unchanged at 5.6 per cent. Reuters
SummaryIndian Ratings has kept its FY15 growth forecast unchanged at 5.6 per cent.

estimates current account deficit (CAD) to be USD 45.4 billion (2.1 per cent of GDP) in FY15. It was USD 32 billion or 1.7 per cent last fiscal.

"Capital flows are expected to be buoyant and are estimated to touch USD 60 billion (mainly through direct and portfolio investment) in FY15," the report said.

The agency believes a manageable CAD and rise in foreign currency assets will support the rupee, which is expected to settle at around 57-58 by end of this fiscal. It said a mild decline in inflation and the rupee appreciation will impact interest rate positively.

It expects 10-year G-sec rate to settle around 8.3-8.4 per cent by end-March 2015.

The report further said the mining sector, though still in red, is recovering and is likely to reverse its trend of contraction since FY12 in FY15.

"We don't expect a quantum jump in iron ore mining in FY15 due to depressed domestic as well as export demand," it said.

It expects the industrial sector to grow by 4.1 per cent in FY15 mainly due to better mining and electricity sector performance.

The uptick in industrial activities in FY15 will also emanate from election-related expenditure, excise duty cuts for the auto sector, project clearances by the Cabinet Committee on Investment and construction activities in Delhi-Mumbai Industrial Corridor and Dedicated Freight Corridor, it added.

However, the report does not see sharp revival in manufacturing sector in the short-run due to low demand.

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