Economists expect 2013 to be better for India

Last Updated: Fri, Dec 07, 2012 21:02 hrs

pEconomists at foreign investment banks such as Deutsche Bank Bank of America Merrill Lynch BofA-ML and Goldman Sachs are painting a rosier picture for the Indian economy in 2013 in the wake of the government&rsquos recent pro-investment measuresppThey are forecasting a possible halt to the decline in economic growth rates thanks to an expected increase in exports strong local consumption and likely policy rate cutspp&ldquoClearly reforms would be helpful in ensuring a durable economic recovery but we think a case can be made for a near-term economic bottom even without major initiatives&rdquo said Deutsche Bank&rsquos economists Taimur Baig and Kaushik Das in a client note Deutsche expects the Indian economy to post a &lsquomodest&rsquo recovery in 2013 after slowing to about 55 per cent this yearppBofA-ML said the decline in economic growth might stop in the December quarter at five per cent with a poor kharif crop affecting agriculture The investment bank expects economic growth to hit six per cent in the first half of 2013 and 65 per cent in 2013-14 due to the statistical impact of a lower base hopes of better rain and lending rate cuts Goldman is projecting a 65 per cent growth in the economy in 2013ppThe more optimistic growth projections are a contrast to their forecasts earlier this year At the time many had pessimistic predictions in the absence of policy action and higher inflation Inflation concerns remain but what has changed is that the government pressed the accelerator on implementation of market-friendly reforms in September which has been cheered by the marketspp&ldquoWhile the economy remains vulnerable to inflation and exchange rate risks coupled with external shocks and domestic political turbulence incentives are in place for the authorities to respond with investment-friendly reforms a dynamic already underway&rdquo the Deutsche Bank economists saidppEconomists including Deutsche&rsquos Baig and Das warn that the economic outlook is far from sanguine in the near term &ldquoAlthough reforms should swing sentiment now we think their impact on the real economy will be felt only in the medium term&rdquo said BofA-ML&rsquos economist Indranil Sen Gupta in a client note Goldman&rsquos strategists led by Timothy Moe in a client note said &ldquoWe feel the worst of the policy issues are behind us confidence in the new finance minister and his team is strong and although India still has many difficult issues to deal with things are improving at the margin&rdquop

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