New Delhi: Gradual fiscal recovery is likely to push the GDP growth numbers of the country to 7.7 per cent in this financial year, says a Citigroup report.
According to the global financial services major, India’s relative macro outperformance continues in a difficult global environment and “it might be time to tune up the optimism on India again”.
“Recent macro data indicate a reversal of soft third quarter of fiscal 2015-16 prints and support our view that a gradual cyclical recovery will push GDP growth to 7.7 per cent in fiscal year 2016-17,” Citigroup said in a research note.
According to the report, reform hopes have revived with a more “productive” Parliament.
Executive-led reform continued (in FDI, infrastructure), but the first half of the Budget session revives hopes for more legislature-driven reforms, it said.
“New bankruptcy code to deal with insolvency should be passed in the second half of the session; GST hopes are alive. Upper house reshuffle should increase NDA strength in 2016 but majority remains elusive,” Citigroup said.
The brokerage firm said that “well-behaved” inflation has paved way for more easing. “Our average CPI forecast of 4.9 per cent in FY17 builds in 50 bps impact from 7th Pay Commission. Another 25 bps rate cut after monsoon clarity, along with better transmission and changed liquidity stance, should lead to lower rates in fiscal year 2016-17,” Citigroup said.
RBI on April 5 cut the key interest rate by 0.25 per cent and introduced a host of measures to smoothen liquidity supply so that banks can lend to the productive sectors and indicated accommodative stance going ahead.