Mumbai: Ratings agency Icra on Thursday said the prevailing gloom may lead it to revise downwards its growth projections for the country, but maintained such an outcome would not hurt capital inflows in the medium-term.
"Based on the monsoon progress and sowing trends in the coming few weeks, ICRA may revise downwards its existing forecast of 6.2-6.4 percent GDP growth for 2012-13," a report by the agency, a division of global ratings agency Moody's, said.
However, it said the domestic growth, though smaller than expectations, will most likely continue to be attractive to global investors given the sluggish economic outlook for most advanced economies.
Pointing to the foreign investors' potential areas of interest, the report said, "as compared to the benign global interest rates, yields on domestic treasury bills, G-sec and corporate bonds are expected to remain attractive to the investors in the near-to-medium term."
It, however, marked currency depreciation, volatile equity markets and lack of clarity in government policies as the pain points which may deter flows in the near term.
On its expectations from the policy, ICRA's view resonated with many of its peers and said that RBI will keep the rates unchanged in its policy announcement on July 31.
"Icra expects the RBI to retain the policy rate in the near-term until monsoon-related concerns are assuaged," it said.
Unlike its rival Crisil, whose research wing came out with a report on Thursday stating that inflation could go up in the event of poor monsoon, Icra maintained its average inflation estimate at 7-7.5 percent for the fiscal.
With inflation being elevated, RBI's capacity to cut rates will be curtailed to up to 0.75 percent till the end of March 2013, it said.
For liquidity management, Icra said RBI will continue doing open market operations rather than reducing the CRR in the forthcoming policy on Tuesday. By doing so, the central bank will maintain headroom for a CRR reduction to address liquidity stress arising as a fallout of global events, it said.
On foreign fund-raising by domestic companies, Icra said the rupee depreciation will render the ECB (external commercial borrowings) window unattractive, despite relaxations in norms governing the inflows recently.

Similarly, the FCCB (foreign currency convertible bonds) flows will also be moderate and will depend on the movement of equity markets, it said.
The agency also said the recent finance ministry directive to public sector banks to curtail dependence on bulk deposits is expected to put pressure on deposit mobilisation for banks this fiscal.


Latest News  from Business News Desk