Macroeconomic Forecast India

July 2006 | Macroeconomic Forecasts

BMI View: Real growth is expected to moderate in FY2006/07 (April-March) to 7.5% from its rapid pace of 8.1% in 2005/06. The key to this slowdown is going to be escalating inflation. The government reduced fuel subsidies on June 5, raising the price of petrol and diesel by 9.2% and 6.6% respectively. Inflation now looks to be on the rise, despite a slight moderation in the June 24 figures. The monetary tightening cycle should therefore continue, and we expect the reverse repo rate to reach 6.25% by the end of the year, with one of the two 25bps hikes coming

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