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Growth may touch 5.5 pc, inflation at 5 pc: PHD Chamber

The PHD Chamber of Commerce and Industry has projected that national GDP by March 2015 is expected to accelerate at 5.5 percent with inflation cooling at 5 percent as a consequence of anticipated recoveries in developed and developing markets coupled with reformists' measures, initiated by the government and the reserve bank of India in recent past.

The Chamber's Business Outlook 2014-15, prepared by its research bureau based on a feed back from various segments of industry with a sample size of 511 respondents also estimates that the repo-rate could slip at 6 percent from current level of 8 percent.

A good percentage of the respondents feel that the apex bank is expected to carry out 25 basis point cut in its future monetary policy review to significantly subside inflation and interest rates to enable all segments of industry to access liquidity for its expansion and modifications.

43 percent of the respondents estimated GDP growth rate to hover around 5 percent to 5.5 percent in the coming financial year 2014-15 whereas 32 percent opined it would touch 6 percent and another 25 percent suggested that the growth could fall below 5 percent.

The study 'PHD Business Outlook 2014-15' has been undertaken to understand the business mood across various segments of the country and comprise responses from the senior management of large, medium and small corporate houses.

Growth estimates provided by various national and international organizations are inspiring. 

According to IMF estimates in its World Economic Outlook, India's growth for FY2014-15 is projected at 5.4 percent which is the second highest amongst the BRICS economies, said Sharad Jaipuria, President, PHD Chamber. Growth in China for the year 2014 is estimated at 7.5 percent while South Africa is estimated to grow at 2.8 percent in the year 2014. Brazil on the other hand is estimated to grow at 2.3 percent in the year 2014 while Russia is estimated to grow at 2 percent in 2014, he added.

Rrespondents across the industry felt that with the recovery in advanced economies and strong growth in US economy during the recent quarters coupled with growth in emerging market and developing economies, growth in the Indian economy is also looking up. The investment climate in the country is reviving as the economy is headed towards higher growth in the 2014-15. Government has already cleared around Rs. 4 lakh crore projects in the past seven months since the inception of the Project Monitoring Group. So these large scale investment will help the economy to attain its lost momentum, said Jaipuria.

According to the survey, the India Inc felt that headline inflation would subside further in FY2014-15 as 70 percent respondents indicated it to decline to a level of around 5 percent from the current level of around 6 percent and 40 percent respondents out of them even forecast it to be below 5 percent. However, the remaining 30 percent of them expected it to remain above 5 percent.

Majority of the corporates (72 percent) felt that food inflation would cool to the range of 5 percent to 8 percent whereas 19 percent respondents expected food inflation to subside to the range of 8 percent to 10 percent. However, 9 percent respondents felt that it is going to remain in the double digits trajectory.

In a bid to contain the sticky inflation, the key policy rates of RBI have been soaring at a high trajectory over the past many quarters. A large majority of corporates (70 percent) felt that Repo rate should be cut by 50 basis points at 7.5 percent from 8 percent at the end of FY2013-14.

However, by the end of FY2014-15, a large proportion of respondents (75 percent) felt that the Repo rate would be reduced by 200 basis points at 6 percent, with a 25 basis points rate cut quarterly.

During the survey, majority of corporate appreciated the recent reform measures undertaken by the government in terms of clearance of various infrastructure projects, opening of FDI in various sectors of the economy, reforms in Land Acquisition Bill etc. However they were also concerned about the key critical reforms including implementation of GST and labor reforms.

These reforms should be undertaken immediately of which implementation of GST should be at the top of agenda of the coming government. They felt that GST has potential to put India's growth in high trajectory by atleast 2 percentage points say, from the current level of 5-6 percent to 7-8 percent. Another critical reform, corporate were expecting from the government is in labor laws. Since labor laws were enacted about 50-60 years back, the laws in our country definitely need to be revisited, especially in light of the evolutionary changes in the industry, its types, processes and problems, said Jaipuria.