ANZ sees GDP clipping at 5.9 pc this fiscal on deficit control

Australia and New Zealand Banking Group, which recently re-entered the domestic market, says the economy is out of the woods and has pegged the current fiscal GDP growth at over 5.9 per cent led by faster expansion in the second half.
"We see the final GDP print this fiscal coming at 5.92 per cent. While the first quarter GDP will be the lowest at 5.5 per cent, in Q2 should it be at 5.9 per cent and the rest two quarters clipping at 6.1 and 6.2 per cent respectively," ANZ chief economist for South Asia, Asian & Pacific region, Glenn Maguire told PTI here today.

While in FY13 the economy grew at 4.5 per cent, in FY14 it inched up by 4.7 per cent.
Resting his optimism on vastly improved twin deficits and a stable rupee, he said inflation was the only major worry that the RBI and the government will have to be wary of going forward.
He, however, warned that inflation will continue to be a big dampener due to the deep structural issues linked with it.
"...Of considerable importance is the near-full control on diesel subsidy," he added. As per the latest pricing, the oil companies are selling diesel at a loss of mere Rs 1.33/litre.

"The problem with inflation here is not output gap but deep supply side issues, hence unless you improve the back-end infrastructure it is going to be a nagging issue," he said, adding that as a result RBI is not cutting rates any time soon.

"Not this fiscal for sure, may be in the second half of next fiscal," Maguire said.
Stating the country is well-placed to face US taper fallout, he said, the steeply narrowed Current Account Deficit (CAD) is a big relief.
Maguire said that post-taper, the rupee will not witness a run-on as it had been subjected to last time and has pegged the rupee level at 60-61 to the greenback.

Asked about investor perception about the country post the Narendra Modi-led government coming to power at the Centre, he said, investors are overwhelmed.
"India is more attractive of the last year's Fragile 5 (Indonesia,India,Brazil,Turkey and South Africa all faced major currency run-ons last year due to their high CAD. From a top-down approach, it will be a 3:1 win to India," he said.
The Modi government has already implemented several steps like hiking FDI limits in defence and insurance, hiking rail fares, an online platform for green nod, allowing banks to raise long-term funds for infrastructure etc, he said.
On the key challenges he said, inflation is and will remain the biggest pain followed by improving the poor infrastructure, Maguire added.