Indian economy to grow 6.5% in 2015-16: India Ratings1 min read . Updated: 15 Jan 2015, 05:16 PM IST
The local unit of the Fitch Group, however, cautioned that the government may miss its fiscal deficit projection in the year to 31 March
The Indian economy will grow 6.5% in 2015-16, up from an expected 5.6% in the current fiscal year, as industrial activity is likely to rise, India Ratings and Research said its economic outlook released on Thursday
The local unit of the Fitch Group, however, cautioned that the government may miss its fiscal deficit projection in the year to 31 March.
The industrial sector will grow 6.5% in 2015-16 as the government’s initiatives to remove structural bottlenecks, improve ease of doing business and its Make in India initiative start showing results and help in a manufacturing revival, the agency said.
The softer interest rate cycle will also help, the report said, with an additional 75 basis points (bps) repo rate cut expected in the next one year, in addition to the 25 bps cut announced unexpectedly by the Reserve Bank of India on Thursday. One basis point is one-hundredth of a percentage point.
“We expect another 75bps cut this year. But the timing will depend on the fiscal deficit numbers projected in the upcoming budget and the quality of fiscal consolidation," said Devendra Pant, chief economist at India Ratings and Research.
The report said the government may not be able to meet its fiscal deficit target of 4.1%.
“The fiscal deficit may increase to 4.2% of GDP (gross domestic product) in the current fiscal on account of a shortfall in tax and non-tax revenue. However, the fiscal deficit could fall to 3.9% next fiscal with higher growth, expected tax reforms and expenditure rationalisation," Pant said.