India growth to hold strong, say analysts

Bengaluru: India’s growth rate is set to remain one of the fastest in the world this year with inflation running just slightly above 5 percent, leaving the Reserve Bank of India (RBI) on the sidelines for at least another six months, a Reuters poll showed on Thursday. Analysts in the latest poll appear confident about growth. They expect the economy to expand 7.8 per cent in the fiscal year ending March 2017, a prediction that has remained largely unchanged over the past six months.

That is even higher than the latest Reuters poll forecasts for the official growth rate in China, expected at 6.5 per cent in 2016 and then 6.3 per cent in 2017. According to an SBI report, “the country’s agricultural GDP is most likely to witness a robust performance in 2016-17, which may pull up baseline GDP by as much as 50 basis points.” This means India’s economy would grow by eight per cent. India is currently exp-ected to grow 7.5 per cent this year and next, acc-ording to the Inter-national Monetary Fund.

Finance minister Arun Jaitley, who is on a US tour to attract investors,  expressed confidence that India may grow at a faster pace this year, if the latest predictions of higher rainfall comes true. “I have seen in the last two or three days the predictions seem to be much kinder to us this year, and if that were to happen, we are capable of …improving upon our growth rate,” Mr Jaitley said in a speech on the nation’s growth pros-pects at a Carnegie Endowment for Inter-national Peace event in Washington.

He, however, feels that India  has the “potential” to do “better”. “Does 7.5 per cent satisfy either the Indian government, me or the Prime Minister or India’s political opinion, the answer is no. I think, by our own yardstick, we realise that we have potential in a helpful environment to do better," he said. Despite higher economic growth and benign inflation, economists assigned a 70 per cent probability of a rate cut at some point this year.

“We believe the current benign inflation trajectory, only a modest recovery in economic activity and the government’s commitment towards fiscal discipline remain conducive for the RBI to maintain its accommodative bias,” wrote Barclays economists Rahul Bajoria and Siddhartha Sanyal. However, a significant minority of economists in the poll, 16 of 37, anticipate no further rate cuts this year.