Crisil pegs average growth at 6.5 pc over the next 5 fiscals.

NEW DELHI: A decisive mandate in the ongoing general elections could help India grow at an average of 6.5 per cent over the next five financial years, outperforming the International Monetary Fund's projection of 4 per cent global growth during 2014-18, ratings agency Crisil has said Ruling out the possibility of India returning to 9 per cent growth in the near future, Crisil has warned that growth could persist at the current rate of about 5 per cent if the elections do not result in a stable government.

"We believe India can grow faster over the next five years, but nowhere near the 9 per cent heydays. There is a 50 per cent chance that growth will average 6.5 per cent over this period, provided we get a decisive mandate in the ensuing general elections, which will hopefully speed up decision making, and improve the investment climate and competitive efficiencies," Crisil has said in its latest 'Growth Outlook Report 2014-15'. "A decisive mandate is expected to hasten pending reforms such as the implementation of the GST (Goods and Services Tax), provide clarity on land acquisitions and environmental clearances and ensure better fiscal and monetary policy coordination.

This will improve private sector investment besides leading to significant cleansing of bank balance sheets and improvement in the process of asset-quality recognition," the report said. A fractured mandate, on the other hand, could lead to compromises and ineffective governance, the report added. World Bank has projected that India's economy will grow at 6.2 per cent in 2014-15 and then rise to 6.6 per cent in 2015-16 and 7.1 per cent in 2016-17. India's Planning Commission has forecast the country's economic growth at 8 per cent during the 12th Plan period (2012-17). However, the economy grew at 4.5 per cent in 2012-13 and is expected to be at 4.9 per cent in 2013-14.

According to Crisil, a repeat of high growth period of 9 per cent witnessed during 2004-11 is difficult over the next five years because of relatively slower growth in the global economy and in private consumption. "For one, the global economy is expanding at a relatively slower pace and therefore, the push to exports will be less strong.

Second, the accumulation of capital stock will take place at a relatively slow pace. Third, private consumption growth is unlikely to lead to record levels of capacity utilisation and lastly, the limited capacity of banks to finance growth because of stressed balance sheets," it said. In order to sustain 6.5 per cent growth beyond five years, India will need pressing policies and better implementation in sectors such as manufacturing, skill development, labour market reforms and agriculture sector reforms, the report added.

Source : economictimes.indiatimes.com