Strong reforms must to pull economy out of morass: Report

Tags: Economy
The economy is 'delicately' balanced and to return to a higher growth trajectory, it needs strong policy reforms, according to India Ratings.

The agency has kept its FY15 growth forecast unchanged at 5.6 per cent.

The agency also rules out any drastic drop in farm productivity saying the reservoirs are a decadal high already and it is too early to assess the impact of possible El Nino.

"The economy, at this point of time, is delicately balanced and requires a serious policy push to return on the high growth path," India Ratings said in a report today.

According to the report, although the worst appears to be over, it is unlikely that the economy will migrate to a high growth phase of around 9 per cent over next 2 to 3 years.

Finance secretary Arvind Mayaram over the weekend had said the economy is likely to grow at 5.5 per cent in the current fiscal.

On the likelihood of an El Nino incident, the report said it is too early to assess the impact of the phenomenon on agriculture.

"Adequate water storage in major reservoirs, 25 per cent higher than last year and 37 per cent higher than the average of last 10 years, as of April 3, 2014, will cushion the adverse impact of a rainfall shortage, if any," it said.

This will also help in alleviating some pressures which are likely to emanate from the lower-than-average seasonal rainfall, at 95 per cent of long period average.

Last week, the India Meteorological Department (IMD) had said the monsoon was expected to be below normal because of the El-Nino effect. The seasonal rainfall is likely to be 95 per cent of the long period average with an error of plus or minus 5 per cent, it said.

The rating agency expects seasonal factors, mainly rainfall, to continue to exert pressure on inflation.

However, it expects both the WPI and the CPI based inflations to fall and average out at 5.5 per cent and 8 per cent, respectively, in FY15.


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