RBI survey revises FY10 GDP to 5.7% Vs 6% previous forecast

Reserve Bank of India (RBI) has released macroeconomic, monetary development report for FY09. In the report, RBI said that the consumer inflation remains high despite WPI fall.

The RBI survey revises the FY10 GDP to 5.7% Vs 6% previous forecast . The survey sees moderation in economic activity in FY09 and FY10. The survey also sees FY09 GDP at 6.6% Vs 6.8% earlier forecast. While FY09 Services growth for FY09 is seen at 9.3% Vs 9.1% earlier forecast.RBI said that the economic outlook has been marked by persistence of less than normal sentiments. The surveys by several agencies show amplified downside risk to growth.

RBI’s survey showed business confidence decline by 20.7% in January-March 2009 and by 13.9% in April-June 2009. The survey found that the food, pharma, cement showed positive sentiment. The survey showed overall positive sentiment for industries except textiles.

A moderate growth is expected in April-June acorss various companies. Smaller companies are less optimistic on growth. The survey also says that the volatility in inflation in last 1-year is unprecedented. Median forecast of different agencies for FY09 GDP is down at 6.6% Vs 6.8%.

In the economic review, RBI said that the median forecast of different agencies for FY10 GDP is down at 5.7% Vs 6%. The domestic demand will be supported by strong rural demand, and stimulus steps.

The Ministry of Agriculture has set a target for food grain produciton for FY09 at 233 mt. Expansion of industrial sector in April-February stood at 2.8% Vs 8.8% (YoY). About 15 industry groups saw decelerated growth during April-February 2008-09. Savings & investments are likely to be lower in FY09. Annualised MoM seasonally adjusted WPI declined since June 2008. The annualised MoM seasonally adjusted WPI became negative since September 2008 and remains negative for March 2009. CPI, though declining remains high at 9.6-9.8% during January-February. Gross tax revenue in revised estimate for FY09 was down by 8.7% than the budgeted estimate.

RBI says that India is still an attractive destination for the investors. Corporate performance after being robust showed the signs of moderation in Q3. RBI expect budgeted revenue surplus in state finance to be wiped out. An impact of fiscal stimulus measures so far estimated to be 2.9% of GDP.

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