The RBI’s ‘Survey of Professional Forecasters’ released on Friday have revised profit growth of corporate sector in the country downwards in 2008-09.

Profit after tax of India Inc is now being forecast to grow at a rate of 24.7 per cent in 2008-09 as against 34 per cent expected in last survey.

While presenting the results of the third round relating to the fourth quarter ended March 2008 – in which the questionnaire was sent to 29 selected forecasters, of which 21 forecasters participated – RBI has made it clear that the results of the survey represented views of the respondent forecasters and in no way reflected its views or forecasts of RBI.

At the same time, annual forecasts of the survey continue to expect real GDP to grow at a rate of 8.7 per cent in 2007-08. Annual forecast for real GDP in 2008-09 is projected to be around 8.1 per cent which is weaker than it was three months ago. The forecasters were asked to assign the probabilities to the possibility that year over year real GDP will fall into various growth ranges.

Key deficit indicator

Forecasters assign the highest 68 per cent probability to growth range of 8-8.9 per cent for the year 2006-07. For the year 2008-09, they assign 40 per cent probability to 7-7.9 per cent growth range of GDP. In their forecast three months ago, they had assigned highest probability to growth range of 8-8.9 per cent.

Broad money (M3) is expected to grow at a rate of 19 per cent in 2008-09 which is higher than its previous estimate of 18 per cent. The bank credit is expected to slow down to 20.3 per cent in 2008-09. 

Country’s  fiscal deficit is expected to be 3.2 per cent of GDP in 2008-09, whereas the combined gross fiscal deficit is placed at 6 per cent of GDP.  Indian rupee is expected to be around 39 vis-a-vis US dollar in 2008-09. Yield on treasury bills (91 days) are projected to be 6.8 per cent by the end of 2008-09 whereas 10-year government securities yield are forecast to be at 7.8 per cent which is slightly higher than the earlier forecast of 7.5 per cent.  
The forecasters expected Repo and Reverse Repo rates to be at 7.6 and 6 per cent respectively by the end of current financial year. The reverse repo rate is forecast to be same as during last survey whereas the repo has been revised upwards from 7.5 per cent during last survey.   Merchandise trade deficit is expected to widen to US $115.5 bn. in 2008-09 which is higher than the earlier estimate of US $103.7 bn.

Long-term forecasts

Export growth is pegged at 15.8 per cent in 2008-09.  Forecasters revised their imports growth forecasts upward at 20 per cent from 17.5 per cent in last survey. Forecasters put net surplus under invisibles during 2008-09 to be US $ 86.4 bn. which is higher than US $ 83.1 bn. expected three months ago.

Its long term forecasts for real GDP for the next five years is projected at 8.5 per cent and 8.9 per cent for the next ten years. Over the next five years, the forecasters expect WPI inflation to be 5 per cent, which is revised upwards from the last survey. CPI-IW inflation will average to 5.5 per cent, same as expected in last survey. 
Over next ten years, the WPI and CPI-IW based inflation are expected to be 4.5 and 5 per cent respectively.