S&P sees GDP inching up to 6.4% next fiscal

GDP revision comes at a time when the rating's agency has been threatening to downgrade the country's sovereign rating to junk

Global ratings major Standard & Poor’s (S&P), which has threatened to downgrade the country’s sovereign rating to junk, today said it saw economic growth improving to 6.4 per cent next financial year.

The agency also retained its growth forecast for the current financial year at 5.5 per cent, half-a-percentage-point above the readings by the Central Statistics Office.

“The increased government welfare spending because of the next general elections, improvement in private consumption, lower interest rates and a better show by agriculture will lead to the growth number going up to 6.4 per cent in FY14,” the agency's credit analyst Geeta Chugh said.

Chugh said the growth number would go up further to 7.2 per cent in FY15, as mining and power sectors will also start showing improvement.

The comments come within a fortnight of the CSO forecasting a poor five per cent reading of GDP in the current financial year, lowest in a decade.

Chugh, however, clarified that the relative uptick in growth has already been factored in the sovereign rating, which is the lowest investment grade rating and the worst amongst the BRIC countries.      

The agency had cited a host of concerns, including the sagging growth numbers, fiscal imprudence and lack of policy initiatives in the past as the pain areas.

Finance Minister P Chidambaram, assuming charge in August, took a slew of measures which led to an increase in investor confidence.

Chidambaram has repeatedly stated that his ministry is committed to adhering to the fiscal deficit targets and pegged the number for this year at 5.3 per cent. Chugh said these steps would lead to a gradual recovery, but warned that the agency would look for progress on the implementation front.