We believe, CAD for the current fiscal will be at 1.5% of GDP. Net capital inflows will top $60 bn. Thus, external situation looks pretty comforting and benign.
We also believe that India is well on a path of faster than anticipated fiscal consolidation and it could be a positive surprise going forward.
In effect, fiscal deficit could be well below 3% in FY17. In our estimate, in FY16, GDP will grow by 6.5%-7% and subsequently the real per capita GDP will grow by more than 5.5%.
So, a rating upgrade in the next fiscal looks a distinct possibility. The last ratings upgrade happened in FY08, when the real per capita GDP growth was 7.9%.
By Dr. Soumya Kanti Ghosh, Chief Economic Adviser, Economic Research Department, State Bank of India.