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RBI survey projects India's 2014-15 GDP growth at 5.4%

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03 February 2015

A Reserve Bank survey of professional forecasters on national income expectations has found India's real GDP (at factor cost) to increase by 5.4 per cent in 2014-15.

In 2015-16, GDP is expected to grow by 6.4 per cent as per the forecasters' latest assessment.

Growth forecast in 'Agriculture & Allied Activities' and 'Services' is seen to improve further to 2.1 per cent and 7.0 per cent, respectively, from the previous round. However, 'Industry' growth forecast is revised downward by 30 basis points (bps) to 3.1 per cent from 3.4 per cent in the previous round.

Service sector is expected to grow by 7.5 per cent.

In terms of subjective probabilities assigned to growth forecasts, forecasters ascribed maximum 50 per cent probability that GDP growth in 2014-15 will be in the range of 5.0-5.4 per cent, and another 43 per cent probability that it will be in the range of 5.5-5.9 per cent.
For the year 2015-16, GDP growth in 6.0-6.4 per cent range is the most probable outcome.

Private final consumption expenditure (PFCE) at current prices is expected to grow by 12.0 per cent in 2014-15 and further by 12.9 per cent in 2015-16.

Forecasters' expect gross fixed capital formation rate to increase by 28.7 per cent of GDP in 2014-15, and by 29.7 per cent of GDP in 2015-16.

Gross domestic saving rate is projected at 30.7 per cent of GDP in 2014-15 and is expected to improve to 31.3 per cent of GDP in 2015-16.

Both money supply and bank credit growth expectations witnessed marginal moderation in the latest round.

While money supply (M3) is expected to grow by 13.2 per cent in 2014-15 and further by 14.0 per cent in 2015-16, bank credit is expected to grow by 13.9 per cent in 2014-15 and further by 15.0 per cent in 2015-16.

Yield of 91-day treasury bills is expected to be at 8.0 per cent and 7.3 per cent at end-March 2015 and March 2016, respectively.

Central government's gross fiscal deficit (GFD) is projected at 4.1 per cent of GDP in 2014-15 and is expected to moderate further to 3.8 per cent of GDP in 2015-16. The combined GFD of central and state governments is expected to be at 6.6 per cent of GDP in 2014-15 and is expected to improve to 6.0 per cent of GDP in 2015-16.

Merchandise exports growth is likely to be 4.5 per cent in 2014-15, a 140 bps downward revision from 5.9 per cent in the previous round. Growth of merchandise exports is expected to improve to 7.2 per cent in 2015-16.

Current account deficit is projected at 1.6 per cent and 1.8 per cent (of GDP) in 2014-15 and 2015-16, respectively. Capital account balance is expected at 3.4 per cent of GDP for 2014-15.

Forecasts of GDP growth in coming quarters witnessed downward revision between 20 bps and 30 bps from the previous round. Real GDP growth is expected to improve gradually from Q3 of 2014-15 to Q3 of 2015-16 and is likely to grow by over 6.0 per cent from Q1 of 2015-16. Service sector is expected to grow by over 7.0 per cent from Q4 of 2014-15.

For inflation, forecast path in the current round is significantly lower than the previous round for both CPI and WPI.

For Q4 of 2014-15, forecast of headline CPI (combined) inflation is revised downward by 100 bps to 5.9 per cent from 6.9 per cent in the previous round. CPI inflation is expected to increase to 6.0 per cent in Q3 of 2015-16.

In line with the headline inflation, the forecasters also revised downward the forecast of core CPI (defined as excluding food and fuel) from the previous round. However, it is expected to increase gradually from 5.1 per cent in Q4 of 2014-15 to 5.3 per cent in Q3 of 2015-16.

Revision in WPI headline inflation forecast in this round is much sharper to the tune of 250 bps to 270 bps from the previous round. WPI inflation is expected at 1.3 per cent in Q4 of 2014-15, which is likely to increase to 3.6 per cent in Q3 of 2015-16.

Forecasters assigned maximum probability of 0.46 that CPI headline inflation will be in the range 5.0-5.9 per cent in March 2015. For March 2016 also, the forecasters assigned maximum probability of 0.53 that CPI inflation will be in the range of 5.0-5.9 per cent.

The Indian rupee is expected to remain stable against the US dollar within the range of Rs62.50/$ to Rs63.85/$ till end of Q3 2015-16.

Forecasts for average real GDP growth for the next five years and the next ten years remained unchanged at 6.8 per cent and 7.2 per cent, respectively, from the previous round.

The average CPI inflation forecast for the next five years and ten years has been cut by 20 bps and 50 bps to 5.8 per cent and 5.0 per cent, respectively. Over the next five and ten years, WPI headline inflation is expected at 4.0 per cent.

RBI said 27 professional forecasters participated in the latest survey round conducted in January 2015. RBI has been conducting the Survey of professional forecasters since September 2007.





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