On November 16, 2009, the Reserve Bank of India released the economic survey results which gives the expectations on GDP, inflation and other key macro economic indicators. The survey gives the expectations of 21 professional forecasters. Discussed in this article are some of the key macro indicators and their expected trend in 2009-10 and 2010-11.
GDP Forecast for India
Forecasters have revised their real GDP growth rate downwards to 6.0% in 2009-10 from 6.5% in the last survey. The highest probability of 37.5 % is assigned to growth range of 6.0-6.4% for the year 2009-10.
For the year 2009-10, the forecast for agriculture has been revised downwards from 2.5% to (-) 1.4%. For industry, the forecasts have been revised upwards from 4.8% to 6.3% whereas for the services sector, there was modest downward revision from 8.3% in the earlier survey to 8.1% in the current survey.
For the year 2010-11, the forecasters have assigned highest probability of 49.3% to 7.5-7.9% growth range for GDP.
Inflation Forecast for India
Forecasters' median estimates for WPI inflation in the third and fourth quarters of current financial year are at 4.0 and 6.8%, respectively which have been revised upwards from 2.5% and 5.4% respectively in the last survey. So we can expect a interest rate hike by the RBI relatively soon as it intends to stay ahead of the curve.
The forecasters expect end period repo rate and reverse repo rate to be at 5.0% and 3.5 respectively in 2009-10, which are same as expected in the last survey.
Forecasters have assigned highest 34.3% chance that inflation will be in the range 6.0-6.9% in 2009-10 and highest 38.8% chance that it will fall in 5.0-5.9% in 2010-11.
In my opinion, the decline in inflation expectations for 2010-11 is promairly due to the expectation that food prices would decline by then. I don't personally see the commodity (industrial) prices falling sharply in the forseeable future.
Corporate Profit Growth Forecast
The profit growth of corporate sector in 2009-10 has been revised upwards to 10.0% from 7.5% in the last survey. The growth in profit is expected to be 14.5% in 2010-11, which has been revised marginally downwards from 15.0% in the last survey.
Thus, the corporate profit growth forecast remains robust.