India's GDP growth rate is likely to witness slight improvement in 2014-15 to clock a 5-5.5 per cent expansion on expectations of a normal monsoon and an improvement in the manufacturing sector, rating agency Icra said on Thursday.
The GDP growth will improve to 5-5.5 per cent on factoring in a normal monsoon, a mild improvement in manufacturing growth and a pick-up in investment activity in second half of the fiscal year, it said in a statement.
For the ongoing FY14, the agency said the final growth mark will come below the Central Statistics Office's projection of 4.9 per cent as the factory output data has consistently been weak.
The growth in the October-December 2013 period is likely to drop to 4.6 per cent as against 4.8 per cent in the preceding September quarter because of the slowdown in the industrial activity, the rating agency said.
Presenting the interim budget on Monday, Finance Minister P Chidambaram had expressed optimism over the growth potential of the country, saying it will touch 5.2 per cent for both the December and March quarters, to take the yearly (FY14) number in the vicinity of 5 per cent.
(Read: All you want to know about interim budget 2014)
For FY15, Icra said agricultural growth will revert to the trend of 2-3 per cent assuming a normal monsoon, as against the growth of up to 5 per cent which some economy watchers expect it to deliver this fiscal year.
The rating outfit, however, said interest rates are expected to be maintained at the high levels and this will limit investments.
However, demand for passenger vehicles and medium and heavy commercial vehicles -- suppressed because of the economic gloom this year -- is expected to pick up in FY15 "given the pent up demand following the sustained contraction in the current fiscal", it said.
This, in turn, would support a "mild improvement" in the growth of manufacturing, which has been hit in FY14.
Icra expected India's current account deficit gap to be range bound at $45 billion levels for the next fiscal year (2014-15) as well if curbs on gold imports are not lifted.
However, given the political uncertainty, concerns over financing current account deficit may resurface periodically. Demand for gold jewellery is likely to be strong considering the rabi (winter) crop harvest will be good, it noted.
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