New Delhi: Private sector lender HDFC Bank has revised India’s growth forecast upwards to 6.5% for this fiscal on the back of increase in demand and signs of recovery in industrial production.
“Signs of a possible bottoming out in industry on the supply side and private consumption on the demand side have driven us to revise our FY10 growth forecast upwards from 5.8% to 6.5%,” HDFC Bank said in a research report.
The bank further said that it is optimistic on India’s growth prospect as a large part of the economy remains driven by domestic factors.
Moreover, the current fiscal will see the return of private demand as a crucial growth driver largely on account of a reversal in the tight monetary conditions seen through first half of last fiscal and some improvement in sentiment.
However, with the external sector unlikely to recover in a hurry, the Indian economy will remain vulnerable to a contraction in both funding flows and exports, it added.
It has also revised the industrial growth forecast upwards to 4.7% from our earlier forecast of 4%, while maintaining the agricultural growth outlook at 3% on expectations of a normal monsoon coming through.
The bank has also revised the growth outlook of services sector to 8.3% from the previous estimate of 7.8% on better than expected performance in other services like trade, communication, finance and insurance.
It said that growth rate in the last fiscal was largely boosted by increased government expenditure.
“Were it not for the 16.8% increase in government expenditure over FY08, GDP growth for FY09 would likely have come in closer to 4.5%,” HDFC Bank said.
Braving the global recessionary trends, India managed 6.7% economic growth in 2008-09 despite the manufacturing sector recording a dismal performance.
A 5.8% growth rate during the last quarter of the fiscal, at a time when most developed economies have shrunk, puts India among the top-most growing nations.