India Development Update, April 2013
The economy is likely to expand by 5.0 percent in FY2013. Although the slowing momentum of economic growth may have bottomed out in the third quarter of FY2013, even a substantial pickup in the last quarter of the fiscal year is unlikely to lift th...
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Format: | Economic Updates and Modeling |
Language: | English en_US |
Published: |
Washington, DC
2014
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Online Access: | http://documents.worldbank.org/curated/en/2013/04/17647819/india-development-update http://hdl.handle.net/10986/16542 |
Summary: | The economy is likely to expand by 5.0
percent in FY2013. Although the slowing momentum of economic
growth may have bottomed out in the third quarter of FY2013,
even a substantial pickup in the last quarter of the fiscal
year is unlikely to lift the growth rate of real Gross
Domestic Product (GDP) at factor cost much beyond 5.0
percent given the weakness observed over the previous three
quarters. Inflation and fiscal deficit have declined, but
the current account deficit has widened. The Reserve Bank of
India (RBI) has had to strike a tough balance between
providing some monetary stimulus and restraining further
price growth. As inflation, measured by the wholesale price
index, has begun to decelerate in recent months, the
authorities may gain additional policy room. Continued
progress on the reform agenda is key to mitigating downside
risks. The authorities' ability to respond to negative
external shocks is more limited today than during the
2008-09 global crisis. Additional efforts may be needed to
create the fiscal space for India's progress towards
universal health coverage. The depreciation of the rupee
appears to have lost steam, and the currency strengthened in
the second half of the year. With a weaker Balance of
Payment (BoP) position, the rupee continued to lose value
during FY2013 and hit an all-time low in June, remaining
around that level until August. Food inflation remained high
while fuel inflation accelerated after deregulation of
diesel prices. Expenditure compression in the social sectors
and reduction in capital spending allowed for reaching the
fiscal targets. |
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