Global rating agency Moodys on 7th March 2013 forecasted that India GDP set to grow at 6.2% in year 2013,compared to 5.1% (2012). With reforms announced in 2012 (foreign investment in multi-brand retail and aviation,raising FDI cap in insurance from 26 to 49%,allowing foreign investment in pension) has created a stable outlook for Indian economy. These reforms have built up the corporate confidence and will translate into better spending and capital expenditures,most likely by mid-2013.
2013-14 budgets delivered the easiest and smallest cuts in deficit,which is sufficient enough for government from electoral point of view without fanning the fiscal risk. Government,also have announced the plans to keep on going with rolling back subsidies,taxes on HNIs and on some luxury items as well.
With balanced budget and previous reforms,now all eyes are set upon RBI expecting rate cuts,which will further ease the liquidity. According to Standard Chartered research,policy interest rates expected to be cut by 75bps. On inflation side,WPI has declined to 6.62% in January which was 7.18% in December last year. Lowering of inflation rate and expectations of rate cuts has boosted the confidence on investors.
On the other hand it will be highly unlikely that GDP growth will shoot up to double digit in last quarter of 2013,but seeing horizon of 4-5 years it could be very much achievable by Indian government.
MBA FT || FMS DELHI
(This entry is part of our FE MASTERMIND contest. The views expressed in this article are personal and not that of the newspaper.)