Complete report of our Economic Outlook Survey for fiscal 13-14 indicates a a moderation in growth going ahead. The survey results indicate GDP growth to slow down to 5.0% in the current fiscal year. This is a downward revision from the 6.0% growth estimate that was reported in the previous round of the survey. This survey was conducted in the months of August / September 2013 and drew responses from leading economists primarily from the banking and financial services sector.

1. Economic Affairs and Research Division Page 1
Economic Outlook Survey
October 2013
Highlights
Results of FICCI’s latest Economic Outlook Survey show a moderation in growth going ahead. The survey results
indicate GDP growth to slow down to 5.0% in the current fiscal year. This is a downward revision from the 6.0%
growth estimate that was reported in the previous round of the survey. The participating economists have mentioned
that the overall economic situation in the country continues to remain weak.
Expectations with regard to performance of the industrial sector have also taken a hit. The participating economists
expect Index of Industrial Production to grow by 1.7% in FY14; this is half of the 3.5% growth anticipated in the
previous round of the survey. Also, inflation risks have emerged once again and the participating economists expect
inflation rate to be around 6.0% by end March 2014. The elevated food prices and sharp fall in the Rupee value
continue to put pressure on prices.
On the external front, CAD to GDP ratio is expected to witness an improvement in second half of the current fiscal. The
ratio is estimated at 4.5% for Q3 FY14 and at 4.0% for the year 2013-14. Taking a long term view of the situation, it
will be important to look at both export and import side of the trade equation if the CAD is to be brought under
control.
With regard to outlook on the exchange rate, participating economists felt that Rupee is expected to remain weak in
the near future before recovering modestly. It is expected to remain in the range of 62-65 against US dollar in near
term. The expectation of reduced foreign capital inflows and high current account deficit would have a bearing on the
Rupee’s movement.
The participating economists were also asked about their outlook on the level of non-performing assets of the
banking sector. A majority of the participating economists felt that provisioning requirement of NPAs is likely to
increase by end of FY14. The respondents indicated that nonperforming assets would go up across a wide array of
sectors including iron & steel, power generation, automobiles and ancillaries, telecommunication, aviation,
construction, real estate and cement.
Further, with regard to the recent announcements on relaxing the FDI norms in various sectors, participating
economists said that it is a welcome step. However, majority of the respondents felt that these announcements will
have limited impact in near term.
Survey Profile
The present round of FICCI’s Economic Outlook Survey was conducted in the months of August / September 2013 and
drew responses from leading economists primarily from the banking and financial services sector. The economists
were asked to provide their forecast for key macro economic variables for the year 2013-14 as well as for Quarter 2
(Jul - Sept) and Quarter 3 (Oct – Dec) of 2013-14. In addition, FICCI sought views of the economists on some topical
issues like volatility in Rupee value, economizing gold demand and impact of recent announcements on revising and
raising FDI caps in sectors like retail, defence, telecom etc

2. Economic Affairs and Research Division Page 2
Economic Outlook Survey
Survey results indicate a GDP growth of 5.0% for FY 14 which is less than 6.0% growth indicated in last survey. The
estimate for GDP growth ranged from a minimum of 4.0% to a maximum of 5.6%.
While agricultural growth is expected to remain good, a sharp decline in industry growth has been indicated as per the
latest projections. The forecast for industry growth is pegged at 1.7% (for FY 14) in the present survey down from 4.5%
(for FY 14) indicated in the previous survey.
Economists expect IIP to grow at a rate of 1.7% in FY14, ranging from a minimum of (-) 1.1% to a maximum of 3.2%.
The forecast for Q2 FY14 is 1.0% (minimum of 0.2% and maximum at 3.1%) and for Q3 FY14 is 1.4% (minimum at (-)
0.1% and maximum at 3.8%).
*The findings of the survey represent views of leading economists and do not reflect views of FICCI. All forecasts represent median values.
Survey Results – Projections for key macro-economic variables*
Annual Q2 FY14 Q3 FY14
Growth Median Min Max Median Min Max Median Min Max
GDP 5.0 4.0 5.6 4.5 3.7 5.3 5.0 3.9 5.4
Agriculture & Allied 3.3 2.2 5.0 3.2 1.5 5.0 3.6 1.6 7.4
Industry 1.7 -1.0 3.5 1.5 -2.0 3.1 1.7 -1.9 3.3
Services 6.8 5.5 9.6 6.5 5.4 9.3 6.4 5.4 9.6
1.7
1.0
1.4
2013-14 Q2 FY14 Q3 FY14
Index of Industrial Production Growth Forecast (in %)
5.2
5.3
5.2
2013-14 Q2 FY14 Q3 FY14
Fiscal Defict as% of GDPForecast

3. Economic Affairs and Research Division Page 3
Economic Outlook Survey
Inflation rate is expected to be at 6.0% in FY14 (end-March 2014) with a lower and upper limit forecast of 5.3% and
7.1%. The forecast for this fiscal is lower than WPI inflation rate of 7.4% registered last year. However, volatility in
currency and higher food prices can put upward pressure on prices. WPI is expected to be around 5.5% in Q2 FY 14
(minimum at 4.9% and maximum 6.0%) and 5.5% during Q3 FY14 (minimum at 5.1% and maximum 6.5%).
Forecast for fiscal deficit as a percentage of GDP for FY14 stood at 5.2%. This is not only higher than the ratio of 5.0%
indicated in the last survey but also higher than government’s target of 4.8%. The passage of the Food Security Bill is
expected to add pressure in containing the fiscal deficit to its targeted level.
Economists expect exports to rebound this fiscal aided by revival of demand in India’s major export markets.
Further, import growth is likely to ease further based on measures taken by the central government to curb gold
imports. The forecast for current account deficit as a percent of GDP for this fiscal was 4.0%. This is somewhat better
than the ratio of 4.5% indicated in the previous survey.
The Rupee is forecasted to touch 62.0 against US dollar by end March 2014. In the previous survey the projected
figure was 56.0 to a dollar by end March 2014. The sharp depreciation in the Rupee value over the past few months has
led to much uncertainty. The minimum and maximum forecast for the Rupee value by end March 2014 range between
57.3 and 70 respectively.
Survey Results
4.0
4.8
4.5
2013-14 Q2 FY14 Q3 FY14
Current Account Deficit as % of GDP
62.0
67.0
65.1
2013-14 (end March 2014) Q2 FY14 (end Sept 2013) Q3 FY14 (end Dec 2013)
Exchange Rate (Re/USD)

4. Economic Affairs and Research Division Page 4
Economic Outlook Survey
VIEWS OF THE ECONOMISTS
OUTLOOK ON NON PERFORMING ASSETS
A majority of the participating economists felt that provisioning requirement for NPAs is likely to increase by end of
FY14. Some of them felt that given the pressure on Rupee, interest rate is likely to remain high. This will put pressure
on leveraged companies’ balance sheet and this could drive the NPAs of the banking sector higher.
It was also indicated that besides bad loans, restructured advances also pose a threat to the banking system as a
major portion of these loans is likely to turn bad in the absence of a significant recovery in the economy. The RBI with
effect from June this year had increased the provision for new restructured loans to 5% as against the earlier
requirement of 2.75%.
The participating economists indicated that non-performing assets would go up across a wide array of
sectors, which included- Iron & steel, power generation, automobiles and ancillaries, telecommunication, aviation,
construction & real estate and cement.
O
OUTLOOK ON RUPEE
Participating economists felt that Rupee will remain weak in the immediate future before recovering modestly. It is
expected to be in the range of 62-65 against US dollar in near term. Various measures have been announced by the
Reserve Bank of India and Government to arrest the fall in the Rupee value. These have had some impact and the
Rupee did gain vis-a-vis the dollar in the past few weeks. Nevertheless, downside risks remain in the form of twin
deficits and sluggish economic growth. The participating economists noted that RBI has been very cautious in directly
intervening in the forex market, as the country’s foreign exchange reserves are sufficient to cover imports for only
about six to seven months. Therefore, without a significant improvement in trade deficit levels or capital inflow
acceleration, the Rupee may further depreciate in the immediate future.
Further, the economists felt that steps announced by Dr. Raghuram Rajan, Governor, Reserve Bank of India after
assuming office if taken up in the right earnest will prove to be beneficial.
The economists were also asked to indicate what measures should be undertaken to arrest the Rupee movement in
case of further volatility. The suggestions were broadly in line with measures FICCI has been advocating and include
issue of sovereign bonds, negotiating swap lines with foreign central banks, improving implementation of projects on
ground, limiting imports of electronics, oil, fertilizers etc. Economists also pointed out that mobilising resources from
NRIs should be considered more seriously. It was said that despite the near-zero interest rate prevailing in respect of
bank deposits in the West, till recently, the Indian banks have not collected as much NRI deposits as they should have
because of the lack of attractiveness of interest rates due to RBI restrictions. With RBI now taking steps to impart
greater flexibility to banks to mobilise NRI deposits, banks should pursue this route for attracting inflows with greater
zeal.
O

5. Economic Affairs and Research Division Page 5
Economic Outlook Survey
ECONOMIZING GOLD DEMAND FURTHER
Gold is the second largest expense in country’s import bill. The overall import bill went up substantially over the past
couple of months mainly led by an increase in the gold and oil imports. This escalated the current account deficit to a
considerable extent.
The central bank had raised the import duty on gold from 6% to 8% in June 2013 and made it mandatory from July
2013 onwards for the importers to keep aside 20% of the imported gold for exporting back. No imports were to be
allowed if this stipulation was not met. In addition, imports of gold coins and bars were banned and the import duty
was increased to 10% in August 2013 and further to 15% (on gold jewellery) in September 2013.
The participants felt that Indian investors should be given robust alternatives to gold as a hedge against the inflation.
New and stable financial products that are lucrative enough for the households to shift their savings away from gold
should be provided. In India, inflation has been quite high for a pretty long period. Government should come up with
more financial products like Inflation Indexed Bonds (IIBs), Gold Accumulation Plan (GAP) etc which have an ability
to challenge gold from its dominant position as a hedge against inflation.
O
IMPACT OF RECENT FDI ANNOUNCEMENTS
The participating economists were of the view that relaxing FDI norms in various sectors is a welcome step. The
country’s strategy of opening up economy in a calibrated manner will have a long term benefit, as we have seen in the
past.
However, majority of the economists felt that impact of recent announcements related to raising and revising the FDI
cap in sectors like telecom, retail, defence etc will have a little impact in near term. It will have a positive impact in the
medium to long term if regulations and guidelines are followed in true spirit and implementation at the ground level
is improved. Majority of the economists opined that a lot will depend on administration of the schemes and that
economic reforms cannot be successful until we remove procedural bottlenecks and improve ease of doing business.
O

6. Economic Affairs and Research Division Page 6
Economic Outlook Survey
Appendix
Growth Outlook 2013-14
Key Macroeconomic variables Mean Median Min Max
GDP growth rate at factor cost (%)
5.0 5.0 4.0 5.6
Agriculture & Allied 3.4 3.3 2.2 5.0
Industry 1.7 1.7 -1.0 3.5
Services 6.7 6.8 5.5 9.6
Fiscal Deficit (as % to GDP) Centre 5.2 5.2 4.8 5.8
Growth in IIP (%) 1.6 1.7 -1.1 3.2
WPI Inflation rate (%) 6.1 6.0 5.3 7.1
Merchandise Export growth (%) 4.2 4.8 -0.4 8.3
Merchandise Import growth (%) 5.0 4.0 -1.0 12.5
Trade Balance (% to GDP) -7.9 -10.0 -10.0 -11.2
US$ / INR exchange rate 62.2 62.0 57.3 70.0
CAD (as % to GDP) 4.2 4.0 3.8 5.1
Prime lending rate 11.9 10.1 9.8 15.0
Money supply growth M3 (%) 12.9 13.0 12.0 15.0
Bank credit growth (%) 14.9 14.5 13.0 18.0
Growth Outlook Q2 FY 2013-14
Mean Median Min Max
GDP growth rate at factor cost (%) 4.5 4.5 3.7 5.3
Agriculture & Allied 3.2 3.2 1.5 5.0
Industry 1.2 1.5 -2.0 3.1
Services 6.5 6.5 5.4 9.3
Fiscal Deficit (as % to GDP) Centre 6.7 5.3 5.0 9.9
Growth in IIP (%) 1.3 1.0 0.2 3.1
WPI Inflation rate (%) 5.5 5.5 4.9 6.0
Merchandise Export growth (%) 1.9 1.5 -1.0 4.5
Merchandise Import growth (%) 3.2 5.3 -5.0 7.2
Trade Balance (% to GDP) -10.4 -11.0 -7.0 -12.0
US$ / INR exchange rate 66.1 67.0 62.5 68.3
Prime lending rate 12.5 12.5 10.0 15.0
CAD (as % to GDP) 3.6 4.8 -2.0 5.3
Money supply growth M3 (%) 12.8 12.6 12.3 13.5
Bank credit growth (%) 15.2 15.0 13.7 17.0
Growth Outlook Q3 FY 2013-14
Mean Median Min Max
GDP growth rate at factor cost (%) 4.9 5.0 3.9 5.4
Agriculture & Allied 3.9 3.6 1.6 7.4

7. Economic Affairs and Research Division Page 7
Economic Outlook Survey
Industry 1.7 1.7 -1.9 3.3
Services 6.7 6.4 5.4 9.6
Fiscal Deficit (as % to GDP) Centre 5.7 5.2 4.8 7.8
Growth in IIP (%) 1.5 1.4 -0.1 3.8
WPI Inflation rate (%) 5.7 5.5 5.1 6.5
Merchandise Export growth (%) 4.7 5.0 -2.0 10.0
Merchandise Import growth (%) 1.6 1.0 -5.9 8.9
Trade Balance (% to GDP) -1.1 -8.0 -12.0 -11.2
US$ / INR exchange rate 64.7 65.1 61.0 68.0
Prime lending rate 12.3 10.3 10.1 16.0
CAD (as % to GDP) 4.5 4.5 3.5 5.2
Money supply growth M3 (%) 13.7 12.9 12.2 15.5
Bank credit growth (%) 15.1 14.5 13.9 16.5