IDFC pegs India GDP growth at 7.7% in FY16

We are in a perfect situation. Never did we have a launchpad as superb as this, said Chief Economist for IDFC Group

Domestic brokerage IDFC today pegged country's GDP expansion at 7.7 per cent for the current fiscal year, saying conditions are perfect for an accelerated economic development.

"We are in a perfect situation, which we have not seen in the last 10 years. We have to board the bus and drive it. We need to capitalise, never did we have a launchpad as superb as this," newly-appointed Chief Economist for IDFC Group, Indranil Pan, told reporters here.

Given the situation, IDFC expects GDP to grow at 7.7 per cent in the current fiscal.

The difference in economic recovery compared with 2003-08, a period which also saw high growth, will be that it will be government investment-led rather than fuelled by private investment and consumption as happened earlier, Pan said.

Yesterday Moody's Investors Service had cut growth forecast for the fiscal to around 7 per cent from 7.5 per cent projected earlier, citing below-normal rainfall.

On Moody's slightly pessimistic estimate Pan said he "does not see things in the same way".

"We have a relatively well buffered agricultural sector, the government spending is strong and improvement in domestic demand will ensure the growth does not slip to 7 per cent," he said.

On reforms, Pan said the Modi government has a deep commitment to reforms, but lacks the numbers in the Rajya Sabha to get through its legislative agenda.

Getting the numbers by better performance in the state polls will be the key and the government may be in a position to usher in greater reforms in its fourth year, he said.

Commenting on the monsoons Pan said though the rainfall has been relatively weak, the cropping patterns are good.

He said inflation is trending down, but will not go below the 4.5-5 per cent levels due to a variety of factors.

The Group, however, expects the Reserve Bank to slash rates by up to 0.50 per cent by end of March, he said, adding the cuts will come towards the latter part of the fiscal.

Pan said one of the biggest factors benefiting the country at present is the compressed oil and commodity prices and added that the Government is doing the right thing by increasing the excise duties to buffer-up the coffers.

On currency, he said the real effective exchange rate (REER) movements and differential in inflation (where India's inflation is higher than the rest of the world) warrant for a depreciation of 3-4 per cent and the rupee will slide further down to the 66 levels against dollar by FY16-end.