HSBC lowers India's FY '14 growth forecast to 5.5%

HSBC lowers India's FY '14 growth forecast to 5.5%

Global financial giant HSBC on Thursday lowered India's growth forecast for this fiscal year to 5.5 per cent from 6 per cent citing slow reform process.

HSBC said growth has been in line with its expectations in 2013, but slower reform progress will delay the recovery.

"While we expect further progress on reforms, it will only materialise slowly. Moreover, the global recovery is likely to come later. The recovery in India will, therefore, prove even more protracted," HSBC said in a research note. HSBC has, consequently, cut growth forecast for FY2014 to 5.5 per cent (vs 6 per cent) and FY2015 to 6.6 per cent (vs 7.1 per cent), the note said.

"This monsoon parliamentary session will prove an important test for the government's ability to sustain the reform push," HSBC said.

There are a number of key bills like -- land acquisition bill, insurance bill, pension bill -- that are likely to be voted on during the ‘monsoon’ parliamentary session that starts in July/August. On the inflation front, HSBC said the decline in global commodity prices is likely to continue in the near term, but, in the second half of the fiscal year, inflation is likely to gradually pick up, as growth recovers and global commodity prices firm.

The report further said though the fiscal deficit has came in below 5 per cent of GDP last fiscal year and the trade balance has improved. The fiscal deficit is not likely to narrow further in FY2014, on account of both revenue and expenditure slippage.

Meanwhile, the World Bank forecast 6.7 per cent growth rate for India by next fiscal as exports and private investment are projected to strengthen and provide a boost to growth.

In its latest 'Global Economic Prospects' report, the World Bank said South Asia's regional growth will be driven mainly by a projected pick up in India, whose GDP in factor cost terms is projected to grow 5.7 per cent in the 2013 fiscal year (ending in March 2014), and then accelerate to 6.5 per cent and 6.7 per cent in FY2013-14 and FY2014-15, respectively.

Exports and private investment, which slowed sharply in 2012, are projected to strengthen during 2013-15 and provide a boost to growth.

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