Icra lowers GDP growth forecast to 5.4%

Citing absence of pick-up in private investments, credit rating agency Icra today revised downwards its forecast for the country's GDP growth to 5.4 per cent in the current fiscal, from 5.7 per cent projected earlier.

"Given the absence of a pick-up in private investments despite an improvement in sentiment, low transmission of reduction in cash reserve ratio since September, expectations of a back-ended cut in the repo rate and moderation in consumption, we lower our GDP forecast to 5.4 percent from 5.7 earlier," Icra said in a statement.

Besides, it said that it expects the Reserve Bank to cut lending rates by 25 basis points at the forthcoming mid- quarter review on December 18.

Icra further said it expects fiscal deficit to be at 5.6- 5.7 per cent, up from the government's forecast of 5.3 per cent of GDP.

"Assuming that fuel subsidies for the last quarter are released in FY'14 and disinvestment proceeds amount to Rs 20,000-25,000 crore this year, the fiscal deficit is expected to be around 5.6-5.7 per cent. We expect the slippage in fiscal deficit relative to the Budget estimates to be funded by an enhancement in the announced long-term market borrowing programme for the last quarter by Rs 40,000-50,000 crore," it said.

Besides, Icra said it also expects higher current account deficit, due to a weak currency and lower manufacturing due to lack of power supplies.

"We have revised our expectation of the current account deficit to USD 70 billion or 3.8 percent of GDP, slightly higher than our previous forecast of USD 69 billion or 3.7 percent," it said. It expects the wholesale price index inflation to average at 7.5-7.7 percent for the fiscal.

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