How is Dun & Bradstreet forecasting Indian economy?
D&B has come out with its report on Economy Forecast.
Dun & Bradstreet has come out with its report on Economy Forecast.
GDP to remain subdued at 8.1% during Q4 FY11:Key Economic Forecast:-
Real Economy: In the medium term, while higher exports may provide some impetus to manufacturing growth, elevated input prices particularly for coal, coupled with rising interest rates would debilitate overall industrial activity. Given the high base effect, D&B expects the IIP to record a sluggish growth of 5%-6% during Apr 11. Price Scenario: As domestic fuel prices witnessed its steepest hike, risks to inflation remain clearly on the upside, reinforced by the persistence of demand-side pressures as reflected in non-food manufacturing inflation. However, the likely slide in global commodity prices along with monetary policy tightening by the RBI is expected to contain the WPI inflation from Q3 FY12. D&B expects the WPI inflation to be around 8.2%-8.4% during May-11. Money & Finance: The lagged impact of policy rate hikes by the RBI and continued rise in inflationary pressures would keep bonds yields at elevated levels for most part of FY12. Rising cost of funds for banks', owing to a hike in policy rate, savings rate as well higher provision requirement for bad and restructured loans, is expected to pose downside risk to credit growth. D&B expects 15-91 day T-Bill yield to average at around 6.9%-7.1% and 10-year G-sec yield to average at around 8.0%-8.2% during May-11. External Sector: The rupee is expected to remain strong in the medium term, as foreign fund inflows owing to interest rate differentials will continue to provide support. Nonetheless, downside risks to the rupee may emanate in the event of recovery in global crude oil prices and major change in global macro-economic conditions. Given the volatility in the crude oil prices the rupee is expected to remain weak and average at around 44.50-44.70 per US$ during May-11. Detailed Commentary:With the global commodity prices remaining at elevated levels and the government finally deciding to increase the domestic prices of fuel i.e. petrol and further hikes in LPG, diesel and kerosene to follow, the upside pressure on inflation has intensified. The expected increase in the transportation costs will severely hit the profit margins of the corporate which are already constricted owing to the other higher input costs. "Given the second round impact of hike in fuel prices on the food, manufactured and wage inflation; which is still to unravel, RBI is expected to raise the policy rates further to tame the inflationary pressures building up in the economy", stated Dr. Arun Singh, Senior Economist, Dun & Bradstreet India. Dr. Singh further added,
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