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CRISIL expects agriculture to grow at 3%
22 Apr '08
3 min read
While inflation is expected to remain high in the next few months due to a continuation of global pressures and an unfavourable base effect, we expect it to soften towards the end of the year. If monsoons are sub-normal and agricultural production falters, inflation scenario could worsen.
The Reserve Bank of India (RBI) has consistently maintained that containing inflation within its target zone is its primary objective.
Given high inflationary expectations, The RBI has already raised CRR by 50 basis points ahead of the policy announcement. This will exert upward pressure on interest rates. CRISIL has revised the 10 year G Sec rate upwards accordingly to 7.7-7.9 per cent by March 2009.
The fiscal situation is also under increased pressure. Growth in tax collections is expected to decline as GDP growth moderates, with a further loss of revenues on account of recent duty cuts to tame inflation.
The subsidy bill on fuel and fertilisers is set to rise due to the global food and crude price scenario. CRISIL's forecast on fiscal deficit for 2008-09 based on the above factors has been revised upwards to 3.9 per cent of GDP inclusive of the off-budget items.
The Reserve Bank of India (RBI) has consistently maintained that containing inflation within its target zone is its primary objective.
Given high inflationary expectations, The RBI has already raised CRR by 50 basis points ahead of the policy announcement. This will exert upward pressure on interest rates. CRISIL has revised the 10 year G Sec rate upwards accordingly to 7.7-7.9 per cent by March 2009.
The fiscal situation is also under increased pressure. Growth in tax collections is expected to decline as GDP growth moderates, with a further loss of revenues on account of recent duty cuts to tame inflation.
The subsidy bill on fuel and fertilisers is set to rise due to the global food and crude price scenario. CRISIL's forecast on fiscal deficit for 2008-09 based on the above factors has been revised upwards to 3.9 per cent of GDP inclusive of the off-budget items.
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