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Modest growth revival in economy
only from H1-13: Goldman Sachs
NEW DELHI, NOV 2:
Indian economy is not likely to see a quick turnaround and
growth rate is expected to revive modestly from the first
half of next year, says a report by Goldman Sachs.
According to the research report, economic activity levels
remain weak in the country, particularly investment
demand, as demonstrated by still “anaemic” order inflows
and project starts.
“Activity is likely at a trough, as easing financial conditions
and liquidity suggest a modest upturn in 1H2013,”
Goldman Sachs said.
Though there is still little sign of an improvement in the
investment cycle, in the trajectory of inflation, or in the
trade deficit, but in order to boost economic growth rate
“continued” policy focus and an improvement in external
conditions are necessary.
“While reforms have started well, and arguably reduced tail risks for
the economy, they need to be sustained in order to lead to a more
meaningful improvement in the business cycle,” the report added.
The next session of Parliament is scheduled to begin on November 22
and would take into consideration a number of important reform bills
like —— the Land Bill, the Pension and Insurance Reform Bills, and
the new Companies Act.
“If these are implemented, they would provide some impetus to an
economy which needs more than just a good start to the reform
process,” the report added.
It said a less—than normal monsoon is also moderating consumption
demand as demonstrated by weak auto sales, among others.
“Therefore, we see activity remaining weak in the fourth quarter of
2012,” the report said.
Moreover, Goldman Sachs said inflationary pressures are likely to stay
elevated in the near term. Further the twin deficits—fiscal and
current account—are likely to be a little higher than expected.
“In the near term, a quick turnaround is unlikely and we
think economic growth is likely to remain below trend”, it
said in its Asia Economics Analyst report, focussing on
India.
Goldman Sachs has revised the WPI forecast to 7.9 per
cent from 7.2 per cent for this fiscal year for the country.
Besides, it has also scaled up the fiscal deficit target for
FY13 at 5.6 per cent of GDP (from 5.3 per cent of GDP
earlier), and the current account deficit at 3.7 per cent of
GDP (from 3.5 per cent earlier).