Public RelationsKotak revises India's growth forecast upward to 7.5% for FY'10
Broking firm Kotak Institutional Equities today revised upwards the growth estimate of Indian economy at 7.5 per cent for the current fiscal on the back of increased economic activities and turnaround in industrial production growth.
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"We now expect Indian economy to grow at 7.5 per cent in 2009-10 and 7.9 per cent in 2010-11 versus our earlier estimates of 6.5 per cent and 7.2 per cent, respectively. We are making these significant revision to our growth forecasts considering that industrial activity turnaround is not just on the back of pent up demand and fiscal stimulus," the company said in a report.
Industrial growth has gathered pace with factory production rising by 11.7 per cent in November, the fastest in over two years, rekindling a debate on whether stimulus provided to spur the economy should continue.
Kotak feels that the Indian economy can withstand partial withdrawal of fiscal and monetary stimulus, and said that the Reserve Bank could hike cash reserve ratio (CRR), money lenders must keep with the RBI, by 50 basis points (bps) on January 29 in its quarterly monetary policy review.
"We continue to expect RBI to hike CRR by 50 bps in its January policy and raise repo rate by 25 bps later by March 2010 to suck part of the large excess liquidity and to signal moderate monetary tightening," it added.
Kotak added that it expects the government to partially roll back the tax cuts in the forthcoming Union budget.
"We think moderate measures would help growth sustainability over the next couple of years," it added.