Thursday, October 3, 2013

India GDP growth forecast 2013 - 2014

With Indian macro in doldrums since the twin deficits went into uncomfortable zone and industrial growth came to an almost grinding halt, a slew of GDP downgrades have happened since July 2013. The numbers pegged by global rating agencies and financial institutions range from 4 to 5.7 percent for FY-14. The most recent downgrade came in from the stable of Asian Development Bank (ADB) which has lowered India’s growth projection for 2013-14 to 4.7 per cent from 6 per cent earlier, stating that the recent rupee depreciation and capital outflows could adversely impact the economy.

Growth Forecast for 2013-2014 (%)
Goldman Sachs
World Bank

The Reserve Bank of India has also lowered the growth projection for 2013-14 to 5.5 per cent from its earlier estimate of 5.7 per cent. World Bank has the most optimistic target of 5.7% while HSBC and Goldman Sachs forecasting the growth to be at 4%. 

InvestorZclub is expecting the growth rate to be at 5% plus minus 10 basis points. We have arrived at this number based on our expectations of 4.5% of GDP in first half while 5.5% in second half of the current financial year. We are expecting second half to be better broadly due to following reasons:

  • Industrial activity has started to pick up slightly since August as witnessed in positive IIP data.
  • Q3 is seasonally a very good quarter as most of the big festivals are lined up in this quarter.
  • India witnessed one of the best monsoon this year which will lift agriclutural output significantly thereby contributing to the GDP growth.
  • 2014 being the year of general election, the spending due to this could help notch up India's GDP by few basis points. 

A 5% GDP outcome for the whole of FY-14 and an expectation of 6% growth rate in FY-15 will be very favorable outcome for India and it's financial markets which, as we predicted earlier, could make Nifty and Sensex hit new high by July 2014.

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