Indian economy seems to be going on the right track, according to a recent survey of economists, who project growth to be a robust 8.9 per cent in the first quarter of 2010-11 and 8.7 per cent in the last quarter of 2009-10.
The overall growth rate would see a better performance from agriculture and allied services and the sector is expected to grow by 4 per cent in 2010-11, up from a negative growth of 0.2 per cent in 2009-10. The services sector too is expected to show an improvement in growth in the current financial year to 9.3 per cent, up from 8.1 per cent in 2009-10.
The survey, conducted by industry body Federation of Indian Chambers of Commerce and Industry (Ficci), however, projects industrial growth to moderate in the current financial year, with growth paring from 10 per cent in 2009-10 to 9.2 per cent in 2010-11.
Most of the economists indicated the Reserve Bank of India would take further measures to tighten monetary policy in its fourth-quarter policy review on Tuesday. Repo and reverse repo rates are expected to be raised by 25 basis points each, while cash reserve ratio could be increassed by up to 50 basis points. However, most said an increase in monetary policy rates was not likely to be followed by interest rate increase by banks.
"Even if banks raise the lending rates, companies will not see much of an impact on their bottom lines, as other (non bank sources) of funds could be substituted for bank funding," the Ficci survey analysis says.
Moreover, consensus among economists is that investment cycle is gaining strength and most expect more money to be raised from non-banking sources and from the equity market during the current financial year in view of the trend observed in the latter part of 2009.
Majority of the economists feel the government disinvestment target of Rs 40,000 crore for 2010-11 is an ambitious, yet feasible, target and most feel, backed by robust growth across sectors, the government revenues will automatically shore up.
The survey panel also suggested cutting down on subsidies and linking prices of oil and oil products to the market to meet fiscal targets. The panel projected the fiscal defciit to be at 5.8 per cent of gross domestic product, which is marginally above the government's target of 5.5 per cent.
The growth estimate of 8.7 per cent for January 2009 to March 2010 is in line with the Central Statistical Organisation's advance estimate of 7.2 per cent growth for 2009-10. GDP averaged 6.7 per cent in the first three quarters of the year.
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