GDP to grow at 7.5% in FY13: Fitch

Global rating agency Fitch today said the Indian economy is projected to grow at 7.5% in 2012-13.

"...Fitch is forecasting that real GDP could grow around 7.5% in 2012-13, up from an estimate of 7% in 2011-12," the rating agency said in its global economic outlook.

"India appears to be reaching the bottom of the current economic cycle," it said, adding, real GDP grew just 6.1% in the third quarter of the current fiscal against 6.9% in the previous fiscal.

Finance Minister Pranab Mukherjee in his Budget speech earlier this month had said, "taking a bird's eye view of the entire economy and keeping in mind the difficult global environment, I expect India’s GDP growth in 2012-13 to be 7.6%."

As far as rate of price rise in the coming fiscal is concerned, Fitch said, there would not be sharp acceleration in the inflation.

"The slowdown in economic activity is taming inflationary pressures. The headline wholesale price index [WPI] rose 7% in February, compared to a 6.6% yoy rise in January," the rating agency said.

"Barring any unforeseen shock to oil prices, it seems reasonable to believe that India is unlikely to face a sharp reacceleration in inflation this year," it said.

The new combined consumer price index (CPI), which will eventually become India’s key inflation gauge, shows inflation stood at 7.7% in January. Since the new CPI measure was only released in February 2011, year-on-year comparisons are still not available, it said.

Fitch also said, given the backdrop of both a slowing economy and easing inflation pressures, it should come as little surprise that the Reserve Bank of India (RBI) has already begun to loosen monetary policy.

The cash reserve ratio was cut by 0.75% to 4.75% in early March, which follows the 0.5% cut in late January.

The RBI should also be able to cut its key reverse repurchase rate, which currently stands at 7.25%, and bring it down by 1% over the course of 2012-13, Fitch said.