In­dian econ­omy to grow at 6.5pc in 2013: Gold­man Sachs

The Pak Banker - - Front Page -


In­dia’s econ­omy is likely to grow by 6.5 per cent in 2013 driven by favourable ex­ter­nal de­mand out­look and domestic struc­tural re­forms push, a Gold­man Sachs report said on Thurs­day. Ac­cord­ing to a re­search note by the in­vest­ment bank­ing ma­jor, growth is likely to pick up grad­u­ally to 6.5 per cent in 2013 and fur­ther to 7.2 per cent in 2014.

This is on the back of “eas­ing fi­nan­cial con­di­tions, in part driven by some re­duc­tion in pol­icy rates, a con­tin­u­a­tion of re­forms boost­ing con­fi­dence, and a nor­mal agri­cul­tural crop,” it said.

The report fur­ther noted In­dia’s GDP growth is likely to ac­cel­er­ate from 5.4 per cent in 2012 to 7.2 per cent in 2014, and re­main high through 20152016, pro­vided government con­tin­ues with its re­forms push.

A con­tin­u­a­tion of struc­tural re­forms is an im­por­tant as­sump­tion un­der­ly­ing th­ese views, it said.

“While al­low­ing FDI in re­tail, the Goods and Ser­vices Tax, di­rect cash trans­fer of sub­si­dies, and ded­i­cated freight cor­ri­dor will help, we be­lieve fur­ther re­forms on fis­cal con­sol­i­da­tion, fi­nan­cial lib­er­al­i­sa­tion and in­fra­struc­ture growth will be needed to sus­tain an im­prove­ment in trend growth,” the report said. The government’s re­cent re­forms in­clude al­low­ing FDI in multi-brand re­tail, avi­a­tion, hik­ing diesel price, cap­ping the num­ber of sub­sidised LPG cylin­ders, open­ing up pen­sion sec­tor to for­eign in­vest­ment and rais­ing the FDI cap in in­surance to 49 per cent. The re­forms “which have be­gun in earnest”, and are likely to progress on a num­ber of dif­fer­ent fronts, should help in boost­ing trend growth.

How­ever, the near- term out­look re­mains “dif­fi­cult” due to still weak growth, high in­fla­tion, and the twin deficits, Gold­man Sachs said and added that quick up­turn in the in­vest­ment cy­cle is “un­likely”.

In­dia had been grow­ing around 8-9 per cent be­fore the global fi­nan­cial melt­down of 2008. The growth rate in 2011-12 slipped to a nine-year low of 6.5 per cent and in the quar­ter ended June 30, 2012, the econ­omy grew by 5.5 per cent.

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