India’s economy will grow at 4.5-5% in 2014: Nomura.

Mumbai: India’s economy is unlikely to see any major pick in 2014 and may end up with about just 4.5-5% GDP growth due to the ongoing fiscal and monetary policy tightening, says a report by Japanese brokerage firm Nomura. “GDP growth will remain in a 4.5-5% range for much of 2014, due to the ongoing fiscal and monetary policy tightening,” said the report.

“The year 2014 is likely to be a year of consolidation and although the investment downturn appears to be coming to an end, we do not yet see any triggers for a revival,” the report said. The GDP growth in the first two quarters of FY14 stood at 4.4 per cent and 4.8 per cent, respectively. The economic growth slowed to a low of 4.5% in FY13 on account of mostly local factors such as high interest rates.

Union finance minister P Chidambaram in his interim budget, presented last week, said he expected growth in FY14 to be at 4.9%, similar to the advance estimate given by the central statistics office.

While he pushed Rs.35,000 crore of oil subsidy payments to next year in the interim budget, the finance minister also cut plan expenditure by Rs.75,000 crore to meet the fiscal deficit target which he finally brought down to 4.6% from the planned 4.8%.

According to the agency, this cut back on government spending will negatively impact growth. Another growth impediment is the high interest rates, which a hawkish central bank has increased three times or a cumulative 75 bps in the past five months.

Nomura said the slowdown in domestic consumption was offsetting the better performance of net exports. The report sees growth to pick up in 2015 on account of higher investments and inflation easing out. “A revival in the capex cycle and a sustained moderation in inflation are pre-conditions to an economic rebound, which we see as more likely in 2015,” Nomura said.

Ratings agency Icra said it expects GDP growth to improve to 5-5.5% in FY15 on factoring in a normal monsoon, higher manufacturing growth and a pick-up in investment activity in second half of the fiscal.

Source : livemint.com