The growth in the economy is finally bottoming out and there are expectations that improvement is in store in 2013. “We see growth picking up gradually to 6.5% in 2013 and further to 7.2% in 2014,” said Tushar Poddar, managing director and chief India economist of Goldman Sachs on Wednesday. According to Poddar India's Gross Domestic Product (GDP) will accelerate from 5.4% in 2012 and shall remain high through 2015-16.
According to Poddar there are three factors which are set to drive this view. “A decline in oil prices in real terms over the next few years, a more favourable external demand outlook and domestic structural reforms which can ease some supply-side constraints,” said Poddar.
Few economists expect growth to start recovering in the second half of the fiscal itself. “Growth appears to be bottoming out and we estimate it to be a tad better in second half as compared to the first-half. The recent policy activism from the government and a favourable base strengthen this view,” said Sachchidanand Shukla, senior vice president and economist at Axis Capital in his report on Wednesday. In the first half of the fiscal, the economy grew by 5.4%.
But it will require greater efforts for achieving a higher growth. “Any chance of returning to an 8% plus growth trajectory would necessitate far greater boost to investment, wide-ranging fiscal reforms, and greater policy efficacy. India is likely to face less pressure in 2013, but we hope the breathing room will not act as a deterrent to medium-term growth-critical measures,” said Taimur Baig and Kaushik Das of Deutsche Bank in a report on Thursday.
However, Credit Suisse on Thursday cut its FY13 growth estimate for the country by a notch to 5.9% attributing it to delay by the Reserve Bank of India (RBI) in cutting rates to prop up growth. The international brokerage also lowered its FY14 growth forecast to 6.9% from the earlier 7.2%. Credit Suisse expects the RBI to cut rates by 50 basis points only in January and not in the upcoming mid-quarter policy review on December 18. The central bank has been holding on to its high rates despite concerns over growth, citing inflation concerns.