Mumbai, Oct. 24: The economy is likely to grow at a 5-5.2 per cent rate in the current fiscal year, with the second half mirroring the selective recovery of the preceding period. However, a slowdown in exports is imminent, which coupled with the hardening of oil prices, could lead to a current account deficit.
Making these projections, the Credit Rating and Information Services of India Ltd (Crisil) said though agriculture will decline by about 0.5 per cent, this decline will be made up by a growth in both industry and services at 5.5-6 per cent and 7.5 per cent respectively. Last year, the economy grew by 5.4 per cent, largely assisted by a growth in agriculture.
“GDP growth will be coupled with an increase of the average inflation rate. The slippage in fiscal deficit will be relatively moderate. This, along with an easy monetary policy, is likely to keep a lid on interest rates. However, a slowdown in exports seems imminent; which in conjunction with the hardening of oil prices could lead to a current account deficit and moderately depreciating rupee,” Crisil’s chief economist Subir Gokarn said.
Crisil said that even as agriculture suffered—and that this will adversely impact consumer goods over the coming months—it was clear that a mild industrial recovery was being fuelled. Most of the evidence pointed to construction activity, a boom being driven by two factors. The first is the highway programme, which, by most accounts, has been progressing reasonably well. The second is housing construction, which is largely the result of falling interest rates
It added that by the same token, services are also experiencing a rebound, which can be partially attributed to the same source. Transport and financial services, in particular, seem to be leading the way.