Economy to grow at 6.1% in FY'14: India Ratings
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Economy to grow at 6.1% in FY'14: India Ratings

Last Updated: Thursday, February 14, 2013, 19:54
 
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Economy to grow at 6.1% in FY'14: India Ratings
New Delhi: Economic growth may improve to 6.1 percent in the next financial year, from the decade low of 5 percent in 2012-13, on the back of reform measures announced after mid-September 2012, India Ratings said on Thursday.

The rating agency also expects aggregate state governments' fiscal deficit to go up to 2.4 percent against the budget estimate of 2.1 percent.

"India Ratings has a stable outlook on state government guaranteed debt programme as it expects credit quality of state governments to remain stable. This is despite the growth slowdown continuing in FY13, touching a decade low of 5 percent. The agency estimates growth to revive to 6.1 percent in FY14," it said.

India Ratings expects slippage in aggregate fiscal deficit of states to be 0.3 percent of the gross domestic product, from the budgeted fiscal deficit of 2.1 percent in 2012-13.

Unlike the earlier episode of fiscal slippage in 2008-09, the slippage in the current year is expected to be low due to absence of adverse shock of salary revision.

The agency noted that both global and domestic headwinds pulled down India's economy growth to 6.2 percent in 2011-12. However, economic reform measures announced by the government since mid-September 2012 have changed the sentiments.

"The impact of these reform measures on macro parameters will be felt in 2013-14. In 2012-13, these measures will have some impact on controlling fiscal slippage," it said in a report.

Industrial growth performance in the next fiscal is expected to improve to 4.4 percent from 3.1 percent in the current fiscal.

The central government tax collection in the next financial year would rise due to higher projected growth in 2013-14 leading to increased growth in current transfer to states, it said.

Barring few states, it does not see significant slippage from state's budgeted deficits, even though the growth in 2012-13 is the lowest since 2002-03.

Aggregate debt of states in the next fiscal is likely to decline to 21.7 percent due to improved economic condition. However, the fiscal slippage would not be significant enough to lead to debt insolvency issue, it said.

Unlike money market liquidity conditions, it said, the liquidity of state governments has remained comfortable.

However, despite comfortable liquidity conditions, tighter money market conditions have led to the spread on state government market borrowing widening to 0.53 percent (up to 21 January 2013) from 0.27 percent in 2011-12, it added.

PTI



First Published: Thursday, February 14, 2013, 19:23


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