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FY13 GDP growth to be at 5.6% despite better rains: BofA-ML

Unless lending rate cuts come off another 50bp, FY13 growth will find it difficult to do a modest 5.6%, let alone the RBI's 6.5%, the bank said.

, ET Bureau|
Sep 10, 2012, 03.37 PM IST
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Unless lending rate cuts come off another 50bp, FY13 growth will find it difficult to do a modest 5.6%, let alone the RBI's 6.5%, the bank said.
Unless lending rate cuts come off another 50bp, FY13 growth will find it difficult to do a modest 5.6%, let alone the RBI's 6.5%, the bank said.
KOLKATA: The revival of rains should save the winter rabi crop from drought said Indranil Sengupta, India economist at Bank of America Merrill Lynch (BofAML) in a report released on Monday.

The report said that Indus waters, a proxy for moisture conditions in north Indian wheat fields, have now risen to 94% below normal from 55% in mid-July. Water in the Bhakra, Pong and Thien dam reservoirs has climbed to almost 90% of normal.

The report said: "It however, is too late to reverse the damage done to the ongoing autumn - kharif- harvest. Just released sowing data shows that all crops - sugarcane - continue to lag 2011 levels, although there has been a pick up in pulses in recent weeks.

"BofAML is retaining FY13 5.6% growth forecast despite better rains. The upside risk of 50bp to our 0.5% agricultural growth projection, on account of revival of rains, is effectively neutralized by a 50bp downside risk to our 4.7% industrial growth forecast, with the RBI delaying monetary easing and by extension, lending rate cuts,"" Mr Sengupta said in the report.

In fact, unless lending rate cuts come off another 50bp (25-50bp done), FY13 growth will find it difficult to do our modest 5.6%, let alone the RBI's 6.5%. BofAML expects a 25bp CRR cut in the RBI's September 17 policy.

"We thus continue to expect rural demand to continue to slow in second of 2012. On our part, we estimate that farm income will slow 7.4% in the coming kharif harvest and 11.3% in the summer rabi harvest gone by from 15% in 2011-12,"" the report added.
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