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Credit Suisse slashes India’s FY13 GDP forecast to 6%

27 Sep 2012 Evaluate

Investment bank Credit Suisse besides pruning India’s gross domestic product (GDP) growth forecast for the fiscal year ending in March 2013 to 6% from 6.5%, also slashed its forecast for fiscal 2013-14 to 7.2% from 7.8%. The integrated global bank, in its note besides pointing at the lag of with which monetary policy operates, underscored monetary easing to have a bigger impact on 2014/15 GDP growth than 2013/14.

Further, Credit Suisse expects a cut in interest rates by an additional 125 basis points (bps) by the end of the current fiscal year, including a 50 bps cut in October. Furthering its anti-inflationary stance, world’s most aggressive central bank, Reserve Bank of India (RBI), maintained a status quo on key policy rates, viz. repo and reverse repo, in its last mid-quarter monetary policy review on September 17, 2012.

On the flip side, US rating agency, Moody’s on Sept 26, reiterated its stable credit outlook on India, saying that it ‘doesn’t see a rating downgrade as growth slowdown is not irreversible.’ However, Moody’s despite expecting improvement in economic growth on the back of consumer demand, the rating agency doesn’t see India meeting its fiscal deficit target.

However, the government, off lately has announced slew of measures in the last fortnight to contain fiscal deficit. The measures included reducing subsidy bill by increasing diesel prices by Rs 5 per litre and capping the number of LPG cylinders to nine per household.

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