Good times ahead for India's GDP growth, says Citigroup report

A Citigroup report has said that gradual fiscal recovery will most likely push the GDP growth to 7.7% this financial year. The global financial services major added that India's relative macro outperformance continues in a difficult global environment and it might be about time that we start getting optimistic about it.

"Recent macro data indicate a reversal of soft third quarter of fiscal 2015-16 prints and support our view that a gradual cyclical recovery will push GDP growth to 7.7 per cent in fiscal year 2016-17," Citigroup said in a research note. As per the report, reforms look more powerful because of more "productive" Parliament.

"New bankruptcy code to deal with insolvency should be passed in the second half of the session; GST hopes are alive. Upper house reshuffle should increase NDA strength in 2016 but majority remains elusive," the report added. It also said that "well-behaved" inflation has made things easier.

"Our average CPI forecast of 4.9 per cent in FY17 builds in 50 bps impact from 7th Pay Commission. Another 25 bps rate cut after monsoon clarity, along with better transmission and changed liquidity stance, should lead to lower rates in fiscal year 2016-17," Citigroup said.

Earlier this month, RBI cut the key interest rate by 0.25% and brought it do 6.5%; ensuring that banks lend to the productive sectors that require the boost.

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