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Guesswork on growth

Aug. 27: There is a buzz of expectation in the markets ahead of the Central Statistical Organisation’s announcement of the country’s first-quarter economic growth numbers on Friday.

Domestic credit rating agency Icra today said it estimated that the economy had grown 5.5 per cent, while Moody’s Analytics put it slightly lower at 5.1 per cent.

In the same quarter a year ago, the economy had grown 4.7 per cent.

Icra said its estimate was underpinned by two factors — a pick-up in industrial growth and a favourable base effect.

Moody’s Analytics said it saw the “beginnings of this cyclical improvements”.

“The Indian economy is likely to accelerate in the second quarter of 2014. Most parts of the economy are improving. Capital expenditure could surprise on the upside,” the Moody’s report said.

Growth rate for the 2013-14 fiscal was also at 4.7 per cent. After a gap of several years, growth had slipped below 5 per cent in 2012-13 and 2013-14.

“We anticipate a steady return to potential growth by 2016. India's new Prime Minister Narendra Modi has taken office at an opportune time,” Moody’s Analytics said, adding that the economy is in the early stages of a cyclical upturn.

It said growth could move towards 7 per cent with some modest reforms.

It projected that even without the government’s help, the economy would grow around 5 per cent in 2014 and close to 6 per cent in 2015.

“An improving economy, along with Modi’s strong electoral mandate, provides an ideal platform from which to implement his agenda,” it added.

Industrial production is growing at a solid pace and should be mirrored in the cyclical upturn in the gross domestic product (GDP), Moody’s said.

Outlining the signs of economic upturn, Moody’s said exports and imports had also rebounded and business investment could surprise on the upside.

According to Icra, the trend will reverse with industrial growth picking up at around 3.8 per cent in April-June against 0.2 per cent in the previous quarter. Growth in the services sector is expected to remain steady, which will be offset by moderate growth in agriculture during the quarter under review.

For the current financial year, Icra expects a mild recovery in growth at around 5.3-5.5 per cent.

Unfavourable monsoon and delayed kharif sowing can weigh on rural demand, while elevated inflation and sticky interest rates may limit urban spending, the report said.

 
 
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