Fast Market Research recommends "India Business Forecast Report Q2 2013" from Business Monitor International, now available

Boston, MA -- (SBWire) -- 03/04/2013 --Core Views

Conditions are ripe for investment spending to lead an economic growth upturn, aided at the margin by an improving export performance.

That said, the government's persistent fiscal failings will prevent a more pronounced growth recovery, by keeping interest rates high and weighing on overall investor sentiment.

The ruling United Progressive Alliance (UPA) will outline India's most significant budget for several years on February 28. On balance, we see a mixture of both populism and pragmatism which, although unlikely to fully satisfy either the electorate or investors, should prevent a major fiscal unravelling this year.

We do not envisage an extended easing cycle in the coming quarters, as external and domestic demand improve at the margin and the lack of concrete fiscal retrenchment keep inflationary pressures historically high. We see scope for 50 basis points of cuts by end- FY2013/14 (April-March).

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Major Forecast Changes

We remain above consensus on India's economic growth outlook, calling for headline expansion of 5.5% and 6.1% for FY2012/13 and FY2013/14 (versus market expectations of 5.3% and 5.5%, respectively).

We have revised down our long-term forecasts for the Indian rupee due to the persistence of India's twin fiscal and current account deficits. We now see only mild appreciation to INR52.00/US$ by end-FY2013/14.

Key Risks To Outlook

Downside Risks To Near-Term Growth Outlook: A possible sovereign ratings downgrade to junk status is arguably the greatest risk to our benign growth outlook.

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