Investment growth to put economy back on track: Citi

Investment growth to put economy back on track: Citi
The Financial Express, June 12, 2009, Page 12

Press Trust of India, New Delhi

Improvement in the investment climate and other factors are likely to help India get back to the growth path, though exports and industrial production are yet to pick up, according to global financial services provider Citi.

‘‘While some incremental data have yet to recover, we think India will do better...,’’ Citi economist Rohini Malkani said in a research note on Thursday citing various factors including revival in investment.

Earlier this month, the global financial services major revised its outlook for India’s GDP growth for 2009-10 to 6.8% from 5.5% and for the next fiscal to 7.8% from 6.6%.

The bank’s revision of India’s GDP forecast is mainly on higher investment growth, Citi said adding the key driver during FY’03-08 was the 17.1% compounded annual growth in investments.

Malkani said the country’s macro is looking up on the back of election results, improvement in the investment climate, both domestic and global, and signs of thawing credit markets.

She said focus on infrastructure development, inclusive growth, business environment (rationalise taxes, land, labour), education, and global integration and financial liberalisation will drive growth.

‘‘The upward revision (of GDP forecast) is primarily due to higher investment growth, where we have raised our numbers from 4% to 9% in FY'10 and from 5.4 to 11.3% in FY'11,’’ Citi said.

While Citi expects ‘‘growth momentum to be stable and deeper’’ in India, there are wild cards like El Nino threat though food stocks are a buffer, continuance of availability of capital and oil prices.

‘‘The rupee, which has gained about 6% after the election results, is likely to strengthen further in the medium term due to higher growth and increased capital flows,’’ Malkani said.