PMEAC outlook likely to peg GDP at 5.5% for FY'14

The Prime Minister's Economic Advisory Council (PMEAC) is likely to present an optimistic picture of the Indian economy tomorrow and peg the Gross Domestic Product (GDP) growth close to 5.5% in the current financial year.

Many brokerage firms and independent analysts, however, have pegged the growth rate at sub 5%.

An official said growth might be pegged at around 5.5%, which would be substantially down from 6.4%, forecast by the Council earlier this year.

Even Prime Minister Manmohan Singh is optimistic of this much growth. "I sincerely hope that the growth rate will be 5.5 percent in the current financial year," the Prime Minister had said in the Rajya Sabha two weeks back.

Council chairman Rangarajan had earlier said that good monsoon would boost agriculture production that will raise GDP growth, which fell to a four-year low of 4.4% in the first quarter of the current financial year..

"“Even if you assume that the non-farm sector, including industries and services, grows at the same pace as last year, the growth rate in agriculture can be anywhere between 4 and 5%, which itself will give another 0.3 or 0.4% growth rate,” Rangarajan had said. Agriculture grew just 2.7% in the first quarter of the current financial year against 2.9% in the corresponding period of last financial year.

However, various analysts have also ruled out the possibility of a 5.5% growth in 2013-14, saying this is difficult to achieve looking at the present indicators.

Credit rating agency Crisil had on Wednesday cut economic growth forecast to 4.8% from their earlier projection of 5.5% for 2013-14. This means that the economy would fall below even a decade low growth of 5% witnessed in 2012-13.

Earlier, CLSA slashed the GDP forecast to 4.2% from 5% for the current financial year. HSBC, Nomura and JP Morgan are now expecting the growth rate to be 4%, 4.2% and 4.1%, respectively.

The report may endorse the government’s optimism on cutting fiscal deficit to 4.8% of GDP in the current financial year from 4.9% in the previous year and the current account deficit to 3.7% of GDP from the record 4.8% over the period.