Economy to grow above 6% in FY14: Assocham.

Improvements in global economic environment, particularly in the US, recovery in exports, normal monsoon and bottoming out of the industrial expansion are the strong reasons for revival of the Indian economy, which is very likely to grow  a shade above 6% in the current financial year, an Assocham Economic Outlook Report said.

According to the outlook report prepared in the last fortnight, there is a definite downward movement in the prices of commodities of key interest to India like gold and crude oil and the decline in these items is not tentative but a consistent trend.

''The growth revival of the Indian economy will largely come on the back of the global factors and the normal monsoon which will have a positive spin offs on the all-important services sector,'' the report noted.

In the  FY 2012-13, the Indian economic growth fell to 5% from 6.6% a year ago  in the wake of drought-hit agriculture output, serious problems in the global markets hitting merchandise exports, high cost of borrowing that hit the industrial output along with other issues and a perception of a policy paralysis among the global investors.

On top of it all, a huge gap between imports and exports made things difficult for the economy, particularly the government finances and the current account deficit reached an unsustainable levels of 6.7% in the third quarter of FY 2-12-13.

However, the global economy and to some extent the Indian economy seem to be shifting the cyclical track which will in the short run at least work to the advantage of net importer countries like India.  

The trade deficit in the current FY is sure to be reduced to a much lower level from USD 190 billion in the previous fiscal.

Exports which have moved in the growth trajectory are expected to gain further momentum, more so in the second half of the FY 2013-14.

The US economy, as is shown by the latest job data release, is not as bad as it looked and several other Asian and African economies are picking up momentum again. Besides, the mood in the stock markets all over the world is holding good resulting into regular flows of funds from the foreign institutional investors into the Indian market.

''A steady inflows from FIIs along with positives on FDI like USD 10.5 billion IKEA proposal will do a lot of good to the Indian macro picture. With both gold and crude oil showing a downward steady bias, the pressure on inflation is bound to get reduced. Good rains expected this year will also help check inflation making RBI revisit its tight monetary stance, which it has kept largely so far.''


Source : myiris.com