2014: Predictions for rupee, inflation

It is that time of the year when stock market analysts churn out predictions for 2014. Goldman Sachs, a US-based global investment bank, predicts a faster economic growth for India next year but expects challenges in terms of inflation and high interest rates.
Here are five expectations of the bank on India in 2014:
1. Better Growth:  Goldman Sachs predicts India’s economy to grow at 5.5% in 2014-15 due to high exports and increase in investment demand. India’s economy represented by the GDP is expected to grow at 4.3% in 2013-14. GDP is calculated by tallying all the expenses and investments in the country, be it at the individual, organisational or government levels. It represents the total value of all the goods and services produced in the quarter. It is reported in two ways – at current and constant prices.

2. Lower inflation: The consumer inflation represented by CPI index is forecast at 8.3% (9.7% forecast for 2013-14) and wholesale prices are expected to rise at 6.3% in 2014-15 (6.5% in the year ago period) due to rising administered prices and an elevated inflation expectation. WPI is measured by calculating the increase in wholesale prices of goods. This is generally lower than retail or market prices. CPI is also called retail inflation as it measures any rise in the prices at which goods are bought by the end consumer.

3. High interest rates:  Goldman Sachs expects the Reserve Bank of India to continue to hike rates due to persistent inflation. “We see the repo rate moving up to 8.5% by mid-2014, as the central bank moves to targeting the CPI,” the investment bank predicts. For the year 2013-14, the repo rate is lower at 7.75%. RBI decides the lending rates as part of its ‘monetary policy review’. It does so by setting the repo rate – the rate at which RBI lends to commercial banks. No loan rate can fall below the benchmark repo rate.

4. Lower current account deficit: Goldman Sachs predicts the current account deficit to remain under 3% of GDP in FY14-FY16, close to sustainable levels, driven by better exports alongside weaker oil and gold imports. India is battled a wide current account deficit (CAD)– the amount it owes to the world. Trade deficit is a major part of the current account deficit. A wide CAD puts pressure on the rupee and fuels inflation.

5. Rupee to fall: Goldman Sachs predicts the rupee to continue to depreciate gradually due to higher inflation than trade partners, the improvement in the current account and balance of payments may limit the magnitude of depreciation. The bank predicts the rupee to hover around Rs 65 to US dollar in 2014-15. The rupee has been making headlines the past few months after it dropped to its lifetime-low of 68-to-a-dollar levels.

Related Video

This work is produced by Simplus Information Services Pvt Ltd. Customer engagement through content. Like this article? Click here for more articles from the same provider.

Latest News

  • Wall Street ends up after jobs report; S&P down for second week
    Wall Street ends up after jobs report; S&P down for second week

    Most now see the U.S. central bank's next rate hike coming in September. The Dow Jones industrial average (.DJI) ended up 79.92 points, or 0.45 percent, to 17,740.63, the S&P 500 (.SPX) gained 6.51 points, or 0.32 percent, to 2,057.14 and the Nasdaq Composite (.IXIC) added 19.06 points, or 0.4 percent, to 4,736.16. The Dow and S&P 500 posted a second straight week of losses, their first two weeks of declines since February, while the Nasdaq registered a third straight week of losses. …

  • Trump dips toe into delicate U.S. debt discussion
    Trump dips toe into delicate U.S. debt discussion

    Would Donald Trump really consider not paying portions of the U.S. debt? The prospect riled economists on Friday as stories in the New York Times and the conservative website The Blaze cast fresh scrutiny on comments Trump made a day earlier. …

  • Insight - Before massive Bangladesh heist, New York Fed feared such cyber …
    Insight - Before massive Bangladesh heist, New York Fed feared such cyber …

    The Fed managers worried that lax security procedures and outdated technology at some foreign central banks could allow cyber-criminals to commandeer local computers and breach foreign accounts at the U.S. central bank, according to interviews with seven current and former New York Fed officials and a former U.S. government official familiar with the discussions. Over several years, New York Fed and Federal Bureau of Investigation officials discussed the risk of an attack made using the …

  • Wall Street Week Ahead - If trend stands, consumer stocks to boost mar …

    The U.S. stock market could get a shot in the arm next week as consumer-facing companies report earnings in a season in which the sector has so far been the overachiever. First-quarter earnings are winding down and the consumer discretionary (.SPLRCD) components of the S&P 500 (.SPX) are the only sector showing double-digit earnings growth from a year ago. Following year-end holidays, the first quarter is not typically a good one for consumer spending. …

  • U.S. shares rebound on wage data; long-dated U.S. yields rise
    U.S. shares rebound on wage data; long-dated U.S. yields rise

    U.S. stocks ended slightly higher on Friday as investors warmed to data showing U.S. wage growth in April despite weaker-than-expected jobs growth, while the wages data also pushed longer-dated Treasury yields higher. The number cast doubts on whether the Federal Reserve will raise interest rates by the end of the year. U.S. shares edged up on the day but posted losses for the week, while European shares posted their biggest weekly percentage decline since early February. …

  • Smallest U.S. job gains in seven months temper rate hike expectations
    Smallest U.S. job gains in seven months temper rate hike expectations

    The U.S. economy added the fewest number of jobs in seven months in April and Americans dropped out of the labour force, signs of weakness that left some economists anticipating only one interest rate hike from the Federal Reserve this year. Nonfarm payrolls increased by 160,000 jobs last month as construction employment barely rose and the retail sector shed jobs for the first time since December 2014, the Labor Department said on Friday. April's job gains were the smallest since September …

  • U.S. FCC confirms approval of Charter, Time Warner Cable merger
    U.S. FCC confirms approval of Charter, Time Warner Cable merger

    The U.S. Federal Communications Commission confirmed on Friday that it had voted to approve Charter Communications Inc's acquisitions of Time Warner Cable Inc and Bright House Networks. …

  • Wall Street gives up on June rate hike by Fed after payrolls disappoint …

    Wall Street's top banks have all but abandoned any expectation that the Federal Reserve will raise interest rates in June, and most now see the U.S. central bank's next rate hike coming in September, according to a Reuters survey conducted on Friday. Friday's weaker-than-expected payrolls report for April acted as the catalyst for several economists at primary dealers to back away from their previous predictions for an interest rate increase at the Fed's next meeting in June. "This report did …



  • Most Actives
    Most Actives
    NamePriceChange% Chg
  • Price % Gainers
    Price % Gainers
    NamePriceChange% Chg
  • Price % Losers
    Price % Losers
    NamePriceChange% Chg


Recent Quotes
Symbol Price Change % Chg 
Your most recently viewed tickers will automatically show up here if you type a ticker in the "Enter symbol/company" at the bottom of this module.
You need to enable your browser cookies to view your most recent quotes.
to view quotes in your portfolios.