India Ratings sees GDP growth at 5.6% in FY15

India's growth rate is expected to slip to 4.9 per cent in the current fiscal but will improve significantly to 5.6 per cent in 2014-15, India Ratings said today.

"Our expectation for improved growth in FY'15 is based on a partial recovery in the industrial and services sector growth, and an uptick in investment due to project clearances by the Cabinet Committee on Investment (CCI)," said India Ratings, a Fitch group company.

India's growth rate plummeted to decade's low level of 5 per cent in 2012-13.

The economic outlook report projected growth of 5.6 per cent with farm sector expansion at 3 per cent, industry 4.1 per cent and services 6.9 per cent in 2014-15 fiscal.

Outlook for the Indian economy is looking significantly better now than it did in mid-2013 when the country was struggling with current account and fiscal deficit, falling rupee and high and stubborn inflation, it said.

"Better-than-expected monsoons, rising exports, swift policy as well as project clearance actions by the government and deft currency management by the RBI have improved business sentiments," the report said.

It projected average WPI-based inflation to decline to 5.5 per cent in FY'15, from 5.9 per cent in 2013-14, which will lead to monetary easing.

"We expect the pressure on food prices to ease in FY15 on the back of normal monsoons. With the expected moderation in inflation in FY'15, the agency expects RBI's policy stance to gradually shift towards monetary easing. We expect a 0.50 per cent reduction in repo rate in its base case," India Ratings said.

It further projected that the fiscal deficit will narrow to 4.5 per cent in FY'15 as the new government, post the general elections, will make efforts to adhere to fiscal consolidation.

For 2013-14, it said the fiscal deficit will remain closer to the budgeted level of 4.8 per cent.

It said the restrictions on gold imports and stable oil prices would likely restrict import growth and restrict Current Account Deficit to 2.2 per cent of GDP in FY'15.

Exports are likely to continue to grow in FY15 due to an economic recovery, though still fragile, in the US and eurozone.

It projected the rupee to settle at around 56-57 to a US dollar by the end of March 2015.

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