Worst over for India, fears of BRICS exit overdone: BofA-ML

BofA-ML expects the RBI to cut interest rates by 125 bps in 2013 as the central bank increasingly shifts focus to reviving growth.

NEW DELHI: Expressing growing confidence in the Indian economy, Bank of America Merrill Lunch on Friday said that the 'worst' is over for India. The bank is positive even though it expects the third quarter growth for the current financial year to hit a low of 5%.

While the third quarter growth will be hit by poor kharif crop, the first half of 2013 may witness a GDP rate of 6%. The process of economic recovery will however be slow, the bank opined.

BofA-ML expects the Reserve Bank of India to cut interest rates by 125 bps in 2013 as the central bank increasingly shifts focus to reviving growth. The rate cut will in turn infuse positive sentiments in the markets and aide economic growth as funds will become relatively cheaper for India Inc.

It expects RBI to cut CRR by 25 bps again on December 18 to pull down lending rates. "Subbarao will likely defer policy rate cuts to January as inflation is set to peak off only in the March quarter, added the report.

The bank is skeptical of any recovery in investment until the global economic cycle turns around and the summer 2014 general elections are over. While reforms will boost sentiment right now, their real impact will only be felt in the medium term.

India will continue to remain the second fastest growing BRIC after China, the report added. The bank feels that 'lamentations' about India being knocked off from BRICs are overdone. However, it will not be until FY15 that growth will return to the estimated potential level of 7.5%, the report stated.

In case of the US economy going over the 'fiscal cliff', India's FY14 growth will slow down to 5.1%, the report said. This will happen owing to the contagion effect that US recession will have.

Source: http://economictimes.indiatimes.com/news/economy/indicators/worst-over-for-india-fears-of-exit-from-brics-overdone-bofa-ml/articleshow/17530320.cms

tesla model s act Black Ops 2 Secede ben roethlisberger Diwali elmo