Economy likely to grow at 6.5% next fiscal: Ind-Ra

Says govt's push for Make in India which focuses on select 26 sectors and improving the 'ease of doing business' will aid the industrial growth

Indian economy is expected to grow at about 6.5% in the next fiscal, on the back of a similar growth rate likely in the industrial sector during the period, ratings firm India Ratings & Research said today.

"India Ratings & Research (Ind-Ra) expects FY16 gross domestic product (GDP) to grow 6.5% based on its estimates that the industrial sector will grow 6.5%," the ratings agency said here today.

In the current fiscal ending March 2015 (2014-15), the domestic economy is likely to grow at about 5.6% and the industrial sector at 3.6%, it said.

"The agency is of the view that a number of announcements made in the FY15 budget to address the structural issues plaguing industrial and infrastructure sector could gather pace in FY16 besides few more being announced in the forthcoming budget," it said in a statement.

Government's push for Make in India which focuses on select 26 sectors and improving the 'ease of doing business' will aid the manufacturing/industrial growth, it added.

"We believe that the economic fundamentals are going to improve. When the Make in India gets rolling, the demand for raw materials is going to move up," said Devendra Kumar Pant, Chief Economist, Ind-Ra.

On inflation, it expects that both Wholesale Price Index (WPI) and Consumer Price Index (CPI) to moderate to 2.8% and 6% respectively in 2015-16.

In response to declining inflation and inflationary expectations, the Reserve Bank (RBI) cut the repo rate by 0.25% today.

"Ind-Ra expects RBI to cut the repo rate by another 75 basis points (0.75%) by FY16. The moderation in inflation is based on the assumption of a normal rainfall in 2015, a moderate hike in procurement price, soft global commodity prices and near stable rupee-dollar exchange rate," it added.

Declining crude prices is a windfall gain for the Indian economy, said the agency, adding that it has improved both the inflation and fiscal outlook.

"As the bond market had already factored in the expected rate cut, the average 10-year government-security yield fell to 7.93% in December 2014 from 8.75% in August 2014. Ind-Ra expects it to fall in the range of 7.1-7.2% by March 2016.