ICRA pegs GDP growth at 6.2-6.4% in FY13, calls for reforms
Mumbai: Rating agency ICRA Wednesday pegged India's GDP growth forecast for the fiscal 2012-13 at 6.2-6.4 percent and strongly asked for an early introduction of reform measures to bring back investor confidence.
"Early introduction of measures to revive business confidence, investments and capital inflows are imperative to improve the macroeconomic outlook and restore investor confidence," the agency said in a note.
Factoring in the possibility of a weaker monsoon, inflation continuing to be above the comfort mark at over 7 percent, easing in policy rates and some resolution to euro- zone crisis, ICRA expects the country's GDP to grow by 6.2 to 6.4 percent in FY13.
The rating outfit joins a rash of think-tanks, research houses, investment banks and other agencies which have downwardly revised their growth estimates for the country following the release of Government data last month which pointed to dismal growth.
Quarterly growth slipped to a nine-year low at 5.3 percent for the three months ended March 31, while the same for 2011-12 was at 6.5 percent, lower than the 6.7 percent clocked during the peak of the post 2008 credit crisis.
The slowdown is being attributed to a slew of reasons, including a 'policy paralysis', where critics are attacking the lack of timely decision making in the executive and blaming it for aggravating troubles.
ICRA's peer in the rating world, Standard & Poor's warned that it will be forced to downgrade the country to junk staus if urgent reform measures are not taken and also blamed the Manmohan Singh administration for the economic gloom.
S&P's criticism, especially of the political leadership, found echo in the corporate world with IT czar and Wipro chief Azim Premji saying, "we are working without a leader. If we do not change, we would be down for years."
Many entities, including Morgan Stanley (5.8 percent) and Crisil (6.5 percent), among others, have downwardly revised their growth estimates, citing various reasons.
On the other macroeconomic factors, ICRA said the Government will not be able to meet its budgeted fiscal deficit target and expected it to widen to 5.5 percent from the targeted 5.1 percent as it may not be able to meet the tax collection targets.
It expects the Reserve Bank to cut interest rates by up to 0.75 percent till March 2013 as it makes efforts of reviving growth. The agency added that at its June 18 mid- quarter policy review, the Central bank will go for a 0.25 percent cut in the overnight lending rate.
However, unlike other watchers, ICRA does not expect the RBI to cut the cash reserve ratio, or the amount of deposits banks have to park with the apex bank.
Even though it expects the current account deficit to come down to 3.5 percent from year-ago's 4.1 percent, Icra said it will be difficult to maintain the target given the current economic conditions.