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Worst is probably not over for Indian economy

Oct 24 2013, 21:15 IST
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The poll of 24 economists showed gross domestic product (GDP) will grow 4.7 percent in the fiscal. The poll of 24 economists showed gross domestic product (GDP) will grow 4.7 percent in the fiscal.
SummaryIndia's ailing economy is likely to remain under pressure from weak domestic and foreign demand.

the economy and weighed on the rupee currency , which lost nearly 20 percent at one stage this year and hit a series of record lows.

India's high current account deficit has made it vulnerable to a surge in capital outflows from emerging markets and that is expected to weigh on the rupee in the coming year.

However, the poll showed the current account deficit is expected to ease a little to 3.7 percent for this fiscal year and the next.

Earlier this month, Finance Minister P. Chidambaram told Reuters that he will not allow the fiscal deficit to exceed 4.8 percent of GDP, underlining that an austerity drive will not be blown off course by the elections.

Eight of 10 economists agreed that the government will not exceed its planned market borrowing.

Wholesale prices - India's key inflation gauge - are forecast to average 6 percent for this fiscal year and next, remaining stubbornly above the central bank's perceived comfort level of 5 percent.

That would prevent the Reserve Bank of India from taking any measures to shore up the economy.

The central bank surprised markets in September by hiking the repo rate by 25 basis points (bps) to 7.50 percent to signal its resolve in trying to control rising prices.

Economists expect a further 25 bps hike by the end of December.

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