The Indian economy may grow 0.40 percentage points lower at 5.4-5.6 per cent during 2013-14 compared to the earlier forecast, ratings agency Icra said.
The agency revised down the economic growth estimate citing weak economic environment and rupee volatility.
In particular, the rating agency cited the weaker-than-expected performance of the factory output in April-May 2013 and merchandise exports in Apr-Jun 2013, as well as the weak monetary policy easing and transmissions.
It said the RBI will opt for holding the rates at its forthcoming review on July 30 because of the volatility in the rupee.
The agency expects the RBI to hold the repo rate and the cash reserve ratio in the upcoming policy review, to guard against further rupee depreciation.
The ratings agency said the rupee volatility has “emerged as a key factor influencing the Reserve Bank of India’s (RBI’s) actions” because of its implications for macro-economic stability.
The revision in economic growth forecast comes within days of Icra’s parent company Moody’s ratings warning that the recent slide in the rupee can affect the country’s sovereign rating.
Some analysts are pegging growth to go back to the 5 per cent level observed in the previous fiscal, which was a decade low. Prime Minister Manmohan Singh had recently said that it will be difficult to meet the target of 6.5 per cent.
Leave a Reply
You must be logged in to post a comment.