New Delhi: India’s gross domestic product (GDP) is expected to have grown by 5.2 per cent in the first quarter of fiscal 2013 against 5.3 per cent in the previous quarter, according to analyst estimates.
Some analysts expect even weaker growth of 4.9 -5 per cent -- the lowest levels since 2009.
Rohini Malkani of CITI said production numbers will have a bearing on the “value-add” industry numbers for 1QFY13 GDP. “This coupled with sub-par monsoons and the deceleration seen in some service sectors could result in a sub 5 per cent 1Q FY13 GDP print,” she added.
Industrial and investment activity has not gathered pace and the services sector has marginally weakened, according to the estimates.
The political impasse is hindering decision making, and the RBI’s stance of sticking to the current interest rates has led companies to reduce investment.
In June 2012, industrial output shockingly contracted by 1.8 per cent. Capital goods output fell 28 per cent in June from a year earlier. Foreign direct investment is down 67 per cent since the start of the fiscal year in April. The manufacturing sector, which accounts for 76 per cent of total industrial output, shrunk 3.2 per cent year on year.
A steep drop in imports and declining exports led to a narrow trade deficit to a 15-month low of $10.3 billion in June 2012. The deficit stood at $14.42 billion in June 2011. In the June 2012 quarter, the trade deficit fell to $40 billion from $46.3 billion in the year-ago period. Exports in June fell by 5.45 per cent to $25.07 billion in June 2011, imports declined by 13.46 per cent to $35.37 billion.
The impact of a weak monsoon will be felt in the subsequent quarters, according to the estimates.
While expenditure data will continue to reflect poor capital formation, consumption data will be focus to shed light on private consumption.
In a lecture at Cornell University , Reserve Bank of India Governor Duvvuri Subbarao said on Tuesday that the battle against inflation was not over and growth sacrifice was inevitable while reducing price pressure. The central bank is facing scathing criticism for its status quo stance on interest rates.
At the last policy review, Subbarao raised the year-end inflation forecast to 7 per cent from 6.5 per cent on the deficient monsoon and soaring global crude prices, and reduced the GDP forecast to 6.5 per cent from 7.3 per cent.
India is staring at the possibility of a ratings downgrade to ‘junk’ by global rating agencies should its GDP growth come in at sub 5 per cent levels, even as foreign investors remain wary of the investment environment in the country.
In the absence of any policy movement, India remains vulnerable to the global economy.
The US economy performed marginally better than expected in the second quarter, but the rate of growth was weak. Gross domestic product expanded at 1.7 per cent, the Commerce Department said on Wednesday as stronger export growth offset a pull-back in restocking by businesses wary of sluggish domestic demand.
Federal Reserve Chairman Ben Bernanke will speak at the Jackson Hole gathering on Friday amid growing hopes for a new asset purchase programme that could push up emerging market currencies at the expense of the dollar.
Hopes for further Fed action rose last week when the central bank released minutes of its July 31-Aug. 1 meeting. It showed that officials spoke with increased urgency about the need to provide more help for the U.S. economy.
The estimates were made by Kotak Securities (5.2 per cent), ICRA (5.1 per cent), Axis Bank (5 per cent), Barclays (5.3 per cent), BofA Merrill Lynch (5.4 per cent), CARE (5.2 per cent), CLSA (5.3 per cent), Credit Suisse (5.8 per cent), Deutsche Bank (5.5 per cent), HDFC (5.3 per cent), HSBC (5.3 per cent), ING Vysya (5.1 per cent), Nomura (5.4 per cent), RBS (5.2 per cent), UBS (5 per cent), and Yes Bank (5.3 per cent).
