MUMBAI, Nov 30 (Reuters) - India's economy grew at a lower-than-expected 5.3
percent in the quarter ending in September, against an analysts' forecast of 5.4
percent, government data showed on Friday.
The manufacturing sector grew an annual 0.8 percent during the quarter while
farm output rose 1.2 percent, the data showed. In the quarter ending in June
economic growth was at 5.5 percent.
Asia's third largest economy is still growing faster than many other major
economies, but it has slowed from 6.5 percent in the 2011/12 fiscal year and 8.4
percent in the previous two fiscal years.
RAJEEV MALIK, SENIOR ECONOMIST, CLSA, SINGAPORE
'The GDP data are pretty much in line with expectation and we expect the
December quarter GDP to be in the 5.0-5.5 percent range as well, before
improving in the March quarter.
'There is a low-level stabilisation in the economic activity taking place.
The GDP data do not alter our full-year 2012/13 GDP growth forecast of 5.5
percent, improving slightly to 6 percent in 2013/14.
'The government only woke up at the end of September, and this GDP data do
not capture the impact of that change. There will be a time lag as financial
markets discount the likely real economy impact.'
'We do not expect the RBI to cut rates in December but forecast it to cut 25
basis points in January. And, over the course of next year, we expect 100 basis
points reduction in the repo rate. RBI's walk does not echo its hawkish talk
about high inflation. It already has a stealth easing in place but seems shy to
openly acknowledge it.'
ROBERT PRIOR-WANDESFORDE, DIRECTOR, ASIAN ECONOMICS RESEARCH, CREDIT SUISSE,
'Today's number suggests that the economy still remains soft, but not as
weak as some people were anticipating. Growth below 5 percent looks very
unlikely to me.
'The growth is bottoming and we will see an improvement from here, though
not a very strong improvement.
'The growth is below the Reserve Bank of India's trend growth expectation,
and I think the central bank will cut rates further from here. I expect a repo
rate cut in January and there could possibly be another cash reserve ratio cut
BRINDA JAGIRDAR, CHIEF ECONOMIST, STATE BANK OF INDIA, MUMBAI
'There is a wide-scale slowdown in growth and focus now should shift from
inflation to growth. Growth has become critical as consumption is stalling on
top of continued investment slowdown. Growth needs to get traction and for that
RBI needs to cut rates and reforms need to pick up. We expect RBI to cut rates
by 50 basis point and CRR (cash reserve ratio) by 50 basis points in December.'
RAHUL BAJORIA, REGIONAL ECONOMIST, BARCLAYS CAPITAL, SINGAPORE
'There is some minor improvement in manufacturing sector but it is still
scraping the surface while services sector still looks weak. The underlying
momentum for growth is still weak in India. Government spending is fairly a big
part helping support the momentum. There could be some realignment in
expectations at the margin for those who were expecting a sharp slowdown in
growth. I don't think this print will change RBI's views as it is flattish from
the previous quarter and should be within RBI's expectation. We expect GDP for
December quarter to be around 5.5-6.0 percent and in March at 6.0-6.5 percent.'
RADHIKA RAO, ECONOMIST, FORECAST, SINGAPORE
'Domestic markets held on to gains as the Q3 GDP was along expectations,
though undeniably the momentum is still biased for weakness as external
uncertainties depress related domestic engines, consumption slows on high rates
and near-stalled reforms agenda fails to thaw investment interests.
'For RBI, this data would be important though is essentially backward
looking. Inflation thereby will be the main determinant of the policy direction
and despite the soft GDP number, RBI will be in no rush to lower ahead of Q1
2013. Progress on reforms and proper functioning of the parliament will be
important in shaping sentiments further out.'
SUJAN HAJRA, CHIEF ECONOMIST, ANAND RATHI SECURITIES, MUMBAI
'I think we will be able to clock a 5.8 percent growth for the full fiscal
year. However, slow investment and manufacturing growth remains the pain points.
'The second half of the fiscal year will be slightly better than the first
half, and we expect growth to be around 6 percent during the period.
'The global environment is improving, some policy action is happening in
India that will boost overall business sentiment and improve the investment
climate, and agricultural outlook is likely to be better than previously
expected, which will aid growth.'
RUPA REGE NITSURE, CHIEF ECONOMIST, BANK OF BARODA, MUMBAI
'I feel today's GDP growth is a bit overstated due to higher than rationally
expected growth in primary sector. There is likely to be a downward revision in
this number, going forward.
'There are pressures on the Reserve Bank of India to lower interest rates
from all the quarters but the RBI will base its decision primarily on the basis
of evolving inflation trajectory, which does not look favourable at this
A.PRASANNA, ECONOMIST, ICICI SECURITIES, PRIMARY DEALERSHIP IN MUMBAI
'From the RBI perspective, this number should not make much difference
because the central bank's full-year estimate is similar to this. Also, this
data is two months old and the RBI will be looking at current trends. The
sentiment has improved, we need to see whether the industrial production data
also shows improvement.
'I don't think the RBI has completely disregarded the weakness in growth,
but we need to see the next two inflation readings. If inflation peaks out below
the RBI's estimate and the trend of lower inflation continues, chances of a rate
cut go up in January. But at this point we expect the RBI to cut rates by 25
basis points in March.'
SHAKTI SATAPATHY, ANALYST, AK CAPITAL, MUMBAI
'Though agriculture and manufacturing output remained subdued, the growth
sustenance in the service sector defies any considerable slowdown.
'Further, we believe the recent reform initiatives from the government would
have a positive bearing in the overall growth numbers in the coming quarters.
The probability of a December rate cut based upon today's number seems
restricted and the central government timely fiscal actions would be the major
driver for a rate cut in conjunction with the inflation numbers.'
AMOL AGRAWAL, ECONOMIST, STCI PRIMARY DEALERSHIP, MUMBAI
'The deceleration in services is alarming. Overall, growth continues to be
below the potential growth rate of 7 percent.
'I expect liquidity to tighten further with about 750 billion rupees of
advance tax outflows in mid-December. The RBI will have to do a 25 bps or
probably higher CRR cut. However, I do not expect anything on rates.'
UPASNA BHARDWAJ, ECONOMIST, ING VYSYA BANK, MUMBAI
'While the headline GDP has more or less been in line with expectations,
signaling that the non-farm GDP has stabilised, consumption data suggests that
private demand has been sagging. Going forward, we expect seasonal demand to
show some improvement in the overall demand to record an annual growth of 5.7
ANJALI VERMA, ECONOMIST, MF GLOBAL, MUMBAI
'The number is slightly better than my 5 percent forecast, primarily driven
by agriculture. However, there is no overall improvement in macro numbers and
services had another disappointing quarter.
'I still hold on to my 5.3 percent GDP growth forecast for the full fiscal
year. Given that RBI has said that October inflation is still high, I do not see
it cutting rates in December.'
The rupee rose marginally, while federal bonds and stocks were broadly
unchanged after the data.
The main stock index extended gains to 0.4 percent from 0.3 percent
The rupee was at 54.54/56 to the dollar against 54.61/64
The 10-year bond yield was at 8.17 percent, unchanged after
the data. It was down 4 basis points after the central bank announced open
- The economy is set to grow at its slowest pace in a decade this fiscal
year. Manufacturing is contracting and exports are falling. October trade
deficit of nearly $21 billion was its worst on record. Yet, there is political
opposition to opening up the economy and allowing foreign investment, such as in
- India's deficit-cutting plan is faltering as the clock ticks. The finance
minister has banned government officials from holding conferences at five-star
hotels, restricted travel and ordered a freeze on hiring to fill vacant posts.
But a series of revenue-raising setbacks since Oct. 29 means it will be almost
impossible for the government to meet its fiscal deficit target of 5.3 percent
- Central bank Governor Duvvuri Subbarao went against the suggestion of most
external members of an advisory panel and kept the key repo rate steady on Oct.
30, minutes of the quarterly meeting showed.
- The inflation rate is still high, Subbarao said on Nov. 16, suggesting
that the bank is unlikely to loosen monetary conditions anytime soon to support
faltering growth, despite a slight easing in prices last month.
- Headline inflation was at 7.45 percent in October, unexpectedly dropping
to its slowest pace in eight months.
(Reporting by Treasury team; Editing by Ranjit Gangadharan)
Keywords: INDIA ECONOMY/GDP
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