The impact of the various measures taken by the Government as well as the RBI since Oct-08 would begin to unfold gradually and provide some support to the weakening economy.
Going forward, we do not expect any further decline in the manufacturing as well as agriculture sector and hence we believe that the GDP growth would be around 6.2-6.3% in Q4 FY09.
We expect growth to remain subdued till the first quarter of FY10 and to have grown within the range during Feb-09.
Prices of food articles particularly food grains (both cereals and pulses) remained elevated during February 09.
Further, given that the growth in agriculture production is projected to be low in FY09 on account of the expected fall in kharif as well as rabi crop production, prices of food grains might continue to remain high in the near future.
Nonetheless, with falling fuel group inflation, strong base effect and the benefits of excise duty cuts available beyond 31 March 09, inflation is expected to recede faster in the coming weeks and the economy may witness deflation in early Apr 09 - ahead of our initial expectations of early May 09.
D&B expects inflation to average between during March 09.
Money and Finance
Despite the cut in key policy rates and comfortable liquidity conditions, the yield on the ten-year benchmark gilt surged during February 09 and touched 7% as on 12 March 09.
The hardening of bond yields can largely be attributed to the enhanced borrowing programme of the central Government.
With the increased Government borrowing, the huge supply of bonds that is scheduled for the current fiscal year might lead bond yields to remain elevated in the near future.
15-91 day Treasury bill yield too remained high during Feb-09 and hovered in the range of 4.25%-4.75% for the week ended 27-Feb-09. D&B expects yields to average at around in March’09.
Exports continued to decline for the fourth successive month in Jan 09. With fresh export orders drying up due to sluggish demand conditions, the rupee depreciation is also not likely to provide much cushion to exporters going forward.
In the forex market, the rupee surged past the 50 per dollar mark towards the end of Feb 09 and also went on to record an intra-day low of 52.20 on 02 March 09.
We expect the pressure on rupee to ease in the near term owing to the resumption of special market operations (SMO) by the RBI. This unlikely to depreciate further from the current levels and will be in the range of per USD during the month of March 09.
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