Expert Views: March-quarter GDP growth at 5.3%
India's economy growth slowed to 5.3% in the fiscal fourth-quarter to March, well below market expectations of 6.1%.
India's economy growth slowed to 5.3% in the fiscal fourth-quarter to March, well below market expectations of 6.1%.
COMMENTARY:DARIUSZ KOWALCZYK, ECONOMIST, CREDIT AGRICOLE CIB, HONG KONG"The data highlight the unusual degree of weakening of the country's economy, likely driven by poor investment and widening trade gap."The data also poses a dilemma for policy makers, as they have no fiscal room to stimulate growth, while monetary easing scope is very narrow, at least for now, due to rebounding and high inflation."Further weakening of the INR could help a bit, but the key problem is lack of investment, caused by sub-optimal macroeconomic policy making and discouraging policies towards foreign investment."We expect the INR to fall further, to fresh record lows, on the data. We also expect a decline in INR OIS, because decelerating growth will, at some point, help curb inflation, enabling some more monetary easing."ANUBHUTI SAHAY, ECONOMIST, STANDARD CHARTERED BANK, MUMBAI"Shocking numbers as Q4 FY12 GDP growth was even lower than lows witnessed during the financial crisis. A rate cut is a given now. We expect a 25 bps reduction in repo rate on June 18."BACKGROUND:- India's economy, Asia's third-largest, is largely driven by domestic demand. The government has forecast economic growth at around 6.9% in the current fiscal year that started on April 1.- Industrial output unexpectedly shrank an annual 3.5% in March for the first time in five months hit by weak investment, prompting increased pessimism among investors.- The weak rupee - which has shed nearly 12% from its 2012 high - adds to policymakers' headaches by elevating import costs, most notably for crude oil that India buys for 80% of its consumption.- High inflation, stoked in part by the falling rupee, leaves the central bank little room to cut interest rates further.- The Reserve Bank of India last month delivered a larger-than-expected 50 basis point cut in benchmark rates but warned that it sees limited scope for more reductions.- Factory growth picked up in April, helped by bulging order books, the HSBC-Markit purchasing managers' index shows, but the sector is not out of the woods yet.Also readExpect 7% GDP growth in FY13, says HSBCGDP growth hits 9-yr low of 5.3% in FYQ4 Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
