It has also upgraded agricultural growth to 5 per cent from 3 per cent in the current fiscal on account of bumper agriculture output in April-May this year.

It said current account deficit is unlikely to widen substantially despite an unexpected slowdown in capital inflows.

Large forex reserves of around $29 billion and exchange controls in the forex markets preclude any precipitous fall in the rupee in the immediate future, it said.

HSBC has projected rupee to depreciate to Rs 44.5 against dollar in the first half of current fiscal and to Rs 47 by end march 2000.

HSBC said, GDP growth in the current year has been upgraded due to excellent agriculture output along with higher rural incomes to benefit sectors catering to rural demand.

"Sectors likefast moving consumer goods, tractors, motorcycles, agrochemicals, consumer durables and cement will benefit on the back of significant higher rural incomes," HSBC said.

Apart from it, higher salaries and arrears to government employees (particularly at the state government levels) along with population growth of about 1.8 per cent would show higher growth in consumption related sectors.

For the industrial sector, it said market mechanism has broken down in the case of infrastructure industries which is evident from the excess capacity in steel, cement and engineering.

The quarterly update said the key to upsurge in industrial growth lies in the rational pricing of infrastructure products, which is essential for investment growth.

It also said liquidity is expected to remain comfortable in the next three-six months on account of slack economic season and the Reserve Bank of India (RBI) is expected to reduce cash reserve ratio (CRR) to maintain easy liquidity.