India unlikely to grow at 6%

India’s growth is unlikely to exceed six per cent in the current fiscal year ending March 2013, a report by the Associated Chambers of Commerce and Industry of India (Assocham) said.

“It may not exceed 6.2-6.5 per cent even in the 2013/14 financial year,” said the report based on inputs from economists and industry leaders.

India’s Gross Domestic Product (GDP) grew by 5.3 per cent for the July-Sept period last year, lower than 5.5 per cent in the first quarter (April-June).

Despite some optimistic views on the downslide having bottomed out, Indian economy is still grappling with the key problems of high inflation and high interest rates, lack of investor confidence and a terrible situation for exporters, the industry body said in a statement.

The report lists the limitations of the government to do any pump-prime to boost consumer demand in terms of reducing taxes on individuals or the industry.

The fiscal situation is almost on the precipice, leaving little room for Finance Minister P. Chidambaram to revive the industrial and consumer demand in the coming budget.

While the Reserve Bank had given an indication of interest rates cut later this month, reining in inflation will continue be a priority for the central bank, however much the industry demands for the rate cut, the Assocham report pointed out.

“We do not see a rate of more than 100 basis points in 2013,” it said.

With the fiscal deficit crossing 80 per cent of the budgeted for the entire year in the first eight months of the current financial year and the current account deficit widening to 5.4 per cent of the GDP in the July-September quarter, signals about the state of government finances are not quite comforting.

However, the situation will only improve in the medium-to-long-term as the savings and investments still stay above 30 per cent of the GDP.

Emphasis on faster implementation of the infrastructure projects, coupled with the quick rollout of the reform measures like new banking licences, can change the mood for better over a one-year horizon.

Moreover, to deal with a pathetic situation in Europe and uncertainties increasing in the US, India must look for an extensive export market within Asia, which is still growing at a respectable rate.

“The balance of trade with China, the Asian powerhouse, has to be corrected and our exports must equal or at least near–equal to imports from China.

"Despite some slowdown, the Chinese economy continues to grow, raising the global demand for commodities," the report added.