Expert views on December quarter GDP

NEW DELHI (Reuters) - India's economy grew a slower-than-expected 6.1 percent in the December quarter from a year earlier, government data showed on Wednesday.

It was the slowest rate of growth in 11 quarters. Economists on average had expected growth of 6.4 percent, according to a Reuters poll.

COMMENTARY:

RADHIKA RAO, ECONOMIST, FORECAST PTE, SINGAPORE

"Q4 (2011) GDP came in slightly weaker than consensus, though not entirely surprising. Initial growth estimates for this FY had signaled that the agricultural output remained weak, though moderation in the manufacturing sector was likely the starkest as higher input prices and sharp jump in borrowing costs depressed output.

"The ball is in the government's court now to kick start policy reforms to jump-start near-stalled private investments and produce a medium-term fiscal consolidation roadmap at the upcoming budget.

"RBI for its part is expected to closely examine contents of the budget and begin easing rates in Q2 as WPI is largely expected to ease for next few months. Direction of oil prices on geopolitical risks however remain the wildcard."

MARKET REACTION:

* The benchmark 10-year 8.79 percent, 2021 bond rose 1 basis point to 8.20 percent immediately after the data release.

* The BSE Sensex and the rupee were little changed from beforehand.

* The benchmark five-year swap rate and the one year swap rates were also little changed at 7.40 percent and 8.15 percent respectively.

BACKGROUND:

- The annual growth rate for the current fiscal year 2011/12 ending March was originally estimated at 9 percent, which was later revised down to around 7 percent as a series of rate increases, global uncertainties, a slew of graft scandals and policy paralysis slowed down investments.

- Indian consumer prices rose 7.65 percent in the year to January, higher than wholesale inflation for the period but still suggesting price pressures were moderating, adding weight to views that the central bank has room to cut interest rates.

- The Reserve Bank of India (RBI) ran a 20-month interest rate tightening cycle until last October to slow down inflation to 7 percent by March. Economists expect the RBI to cut its main policy rate by 100 basis points in 2012 from the current 8.5 percent.

- India's fiscal deficit is expected to miss the target of 4.6 percent of GDP by March by at least one percentage point. However, economists say prospects of substantial interest rate cuts have diminished as global oil prices rise.

- The RBI is scheduled to review policy on March 15, a day before the country's annual budget. (Reporting by treasury team; Editing by Ranjit Gangadharan)