BNP Paribas expects GDP to touch 5.1% in FY15

French bank BNP Paribas' wealth management arm said it expects the economy to expand by 4.3 per cent this fiscal and the growth to pick up and touch 5.1 per cent in FY15.

"GDP growth for FY14 expected to be 4.3 per cent and FY15 growth to gather more steam, economy to expand at 5.1 per cent," it said in a note published.

GDP growth stood at 4.6 per cent for the first half of the fiscal but the government still hopes it to touch 5 per cent for the entire fiscal due to an expected revival in the second half.

The estimates of analysts and watchers vary, with some brokerages going as low as the four per cent levels.

In its report, BNP Paribas said inflation will have a downward trajectory during 2014, which will result in some rate cuts by the RBI in the second half of the year.

It, however, maintained that the interest rates will stay elevated for the next two quarters.

"Inflation pressures are receding as food prices are coming off and dis-inflationary forces (weak economic growth & negative output gap) are in place," it said.

It said achieving the 4.8 per cent target on the fiscal deficit front will be difficult during the fiscal as the government has already exhausted over 94 per cent of the target by November.

According to the report, the fiscal deficit will shoot up to 5.3 per cent by end of the fiscal. However, on the current account deficit front, the firm sees a lot of positives, saying it will reduce to 2.5 per cent for FY14 as against the all time high of 4.8 per cent in the year ago period.

It said the outcome of the general elections will have a huge impact on the sentiments, saying a stable government can usher in structural reforms and push economic growth.