The month of February, witnessed the vote on account presented by Union Finance Minister. The economy is expected to grow at 4.9% in the current fiscal as compared to 4.5% in the past fiscal. At the vote-on-account/interim budget, the Union Finance Minister projected more than 6% growth for FY 2014-15 and observed that the country can grow at a sustained rate of 8-9% annually over the next 10-30 years; provided inflationary pressure and structural bottlenecks are addressed appropriately. The International Monetary Fund (IMF) suggested strengthening of inflation management policies and doing away with supply bottlenecks for better growth, while the Organisation of Economic Cooperation and Development (OECD) suggested that India needs to reconsider its stringent labour regulations to return to higher growth trajectory. Meanwhile, latest data from the government showed that India's gross domestic product (GDP) grew at 4.7% for the third quarter (October-December) of the current financial year, as against 4.8% and 4.4% in the previous two quarters.
Both fiscal and current account deficits showed some improvement, with fiscal deficit estimated to be 4.6% of GDP in the current financial year, lower than the 4.8% estimated earlier and compared with 4.9% in the previous fiscal. In real terms, however, fiscal deficit touched $85.95 bn during April-January, or 101.6% of the full year target, compared with 89.4% during the last year. CAD, however, is estimated to be capped at $45 bn, only slightly up from $41 bn in the previous fiscal.
Retail inflation rate as measured by the Consumer Price Index (CPI) eased to a 24-month low of 8.79% in January (down from 9.87% in December) mainly due to a drop in food prices. Domestic equity indices recovered in February after a fall in the previous month, with key benchmark indices, CNX Nifty and S&P BSE Sensex gaining 3.08% and 2.96%, respectively. The indices rose due to encouraging domestic cues such as decline in wholesale and retail inflation in January.
Other local developments that boosted the equity market were:
- Positive sentiment following the vote-on-account budget, in which Union Finance Minister proposed excise duty cuts to increase sales.
- Sector-specific news – for instance, IT stocks gained after the industry body NASSCOM stated that it expects IT exports to grow by 13-15% in FY15 as against 13% in FY14. Sugar stocks attracted buyers after the Cabinet Committee on Economic Affairs approved a subsidy of Rs 3,333 per tonne for export of 4 mn tonnes of raw sugar during February and March.
- Renewed buying by foreign institutional investors (FIIs) in February.
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