Citi retains India's growth forecast

Citi retained its forecast for India's economic growth in fiscal 2009 and 2010 on "positive co-ordinated measures" by the central bank and the finance ministry.

"These measures are positive and we maintain our FY2009 and FY2010 GDP estimates of 6.8 per cent and 5.5 per cent respectively," Citi said in a research note today.

Since the intensification of the financial crisis in September 2008, the government has taken several monetary and fiscal measures to stem deceleration in growth.

These include interest rate cuts, relaxation of external commercial borrowing (ECB) norms, increase in FII limits in corporate debt as well as sector-specific measures.

"While we expect further monetary easing in the coming months, the government has said this would be its last fiscal stimulus in FY2009," said Citi analyst Rohini Malkani in the note.

On the monetary stimulus, she said the total liquidity injected into the system since September through CRR cuts and other liquidity measures work out to over Rs 3,00,000 crore.

"The key is now whether and how soon the policy rate cuts and liquidity injection get translated into lower and easier credit availability to the real economy," Malkani noted.

Citi said there were "many positive measures" on the fiscal front. These are increased central government spending by Rs 20,000 crore, excise cut by 4 per cent and allowing states to raise additional borrowing to the tune of Rs 30,000 crore.

On other measures focused on countering recessionary trends and making external credit easier, Citi said, "An extremely positive and long-awaited move was the removal of the all-in-cost ceilings on external commercial borrowing."