India's growth rate is expected to improve to 7 per cent by FY 2017, while inflation and current account deficit are likely to moderate in the coming years, a Citigroup report said.
According to the global financial services major, the Indian economy had faced high and sticky inflation between 2008-2013, around 50 per cent depreciation in currency and elevated interest rates, but the "normalisation" process has begun.
"From an undesirable mix of sub-par growth, high inflation, elevated twin deficits in FY 2013, India is now looking at a pick-up in growth, moderating inflation and a sharply lower current account deficit," Citigroup said in a research note.
While 2013 was the year of normalising the current account deficit, 2014 so far appears to be the year of taming inflation.
As per the quarterly GDP data released last month GDP growth accelerated to 5.7 per cent year-on-year in the first quarter of FY 2015 compared to 4.6 per cent in the fourth quarter of FY14 with encouraging trends seen across supply and demand side components.
The Citigroup report further noted that the recovery in growth numbers from 5.6 per cent in FY15 to 7 per cent in FY17 would be "gradual" and continued policy efforts are needed to meet the RBI's 6 per cent CPI target by January 2016.
"India is largely a 'self- help' story, aided by the new political will coupled with an active central bank. While there is plenty of debate on pace and timing, we reiterate our view that India is on its way back to 7 per cent growth by FY17," the report said.
