India’s Economic Growth To Pick Up To 5.6% In FY15: Fitch

The economic growth of the country is expected to pick up to 5.6% in the current fiscal on account of structural reforms being rolled-out by the government, Fitch Ratings said in a release on Tuesday.

According to the global ratings agency, factors such as pace of fiscal consolidation and structural reforms, investment and inflation environment as well as banking sector's asset quality form downside risks to the economy.

"Fitch expects real GDP growth to pick up to 5.6% in FY15 and 6.5% in FY16 from 4.7% in FY14," it said.

The Indian economy had lost much of its dynamism in recent years due to weak investment, however, a gradual pick-up is expected now, Fitch said. "...A gradual pick-up in investment is expected, as election-related uncertainty has disappeared, and structural reforms are being gradually rolled out," it added.

Until mid of 2013, India's current account deficit (CAD) was a concern for investors, but it has narrowed now due to policy rates hikes and measures, including curbs on gold imports through duty hikes (partially reversed), said Fitch.

The report said high foreign reserves provide a strong buffer to the Indian economy. India's foreign currency reserves stood at $495.5 million as of October 24, 2014.

At the end of September, India’s fiscal deficit -- the gap between government expenditure and revenue -- touched 82.6% of the Budget estimates for 2014-15 to cross Rs 4.38 lakh crore. For entire 2014-15, fiscal deficit has been pegged at Rs 5.31 lakh crore or 4.1% of GDP.

In addition to this, inflation based on the Wholesale Price Index cooled to a 5-year low of 1.77% in October driven by softening prices of fuel and food items. At the same time, retail inflation also eased to 5.52% at the end of October.
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