GDP growth to remain in 4.5-5% range in 2014: Nomura

Tags: GDP, Economy
The economy is unlikely to see any major pick in 2014 and may end up with about just 4.5-5% growth due to the ongoing fiscal and monetary policy tightening, says a report.

"GDP growth will remain in a 4.5-5% range for much of 2014, due to the ongoing fiscal and monetary policy tightening," Japanese brokerage Nomura said in a report.

"The year 2014 is likely to be a year of consolidation and although the investment downturn appears to be coming to an end, we do not yet see any triggers for a revival," the report said.

The GDP growth in the first two quarters of FY14 stood at 4.4% and 4.8%, respectively.

The economic growth slowed to a low of 4.5% in FY'13 on account of mostly local factors such as high interest rates.

Finance Minister P Chidambaram in his interm Budget, presented last week, said he expected growth in FY'14 to be at 4.9%, similar to the advance estimate given by the Central Statistics Office.

While he pushed Rs 35,000 crore of oil subsidy payments to next year in the interim budget, the Finance Minister also cut plan expenditure by Rs 75,000 crore to meet the fiscal deficit target which he finally brought down to 4.6% from the planned 4.8%.

According to the agency, this cut back on government spending will negtively impact growth.

Another growth impediment is the high interest rates, which a hawkish central bank has increased three times or a cumulative 75 bps in the past five months.

Nomura said the slowdown in domestic consumption was offsetting the better performance of net exports. The report sees growth to pick up in 2015 on account of higher investments and inflation easing out.

"A revival in the capex cycle and a sustained moderation in inflation are pre-conditions to an economic rebound, which we see as more likely in 2015," Nomura said.

Meanwhile, rating agency Icra said it expects GDP growth to improve to 5-5.5% in FY15 on factoring in a normal monsoon, higher manufacturing growth and a pick-up in investment activity in second half of the fiscal.

EDITORIAL OF THE DAY

  • Because our politicians elbowed out our teachers on Teachers’ Day

    The Swachch Bharat campaign made the highest leaders sweep. Teachers’ Day is making them teach.

FC NEWSLETTER

Stay informed on our latest news!

INTERVIEWS

Sarthak Raychaudhuri

vice-president, HR, Asia South Whirlpool of India

GV Nageswara Rao

MD & CEO, IDBI Federal Life

Timothy Moe

Goldman Sachs

TODAY'S COLUMNS

Sachin Shridhar

Crouching tiger, hidden dragon

The Chinese are consummate gamblers. If you visit a casino ...

Zehra Naqvi

Capturing change

The pace of change in the world around us can ...

Gautam Gupta

Bring on the Benares brigade

It was in 2003 when I first started work and ...

INTERVIEWS

William D. Green

Chairman & CEO, Accenture