The Indian economy is set to experience further slowdown in the first quarter, amid weakening domestic output and a falling rupee, Capital Economics Senior Global Economist Andrew Kenningham said Friday.
The economist noted that India's annual GDP growth is likely to ease to 5.5 percent in the first quarter, after slowing to 6.1 percent in the fourth quarter, due to the absence of the robust growth recorded in early 2011. The projected growth rate for the first quarter would be lower than at any stage during the 2008/09 global financial crisis.
According to Capital Economics, confidence in the Indian economy has been shaken recently as growth slowed, the fiscal and current account deficits widened, and the government has made no progress with a backlog of reforms.
Also, data published so far signal that growth is unlikely to pick-up in in the second quarter either, with the Reserve Bank of India finding it difficult to cut rates again in the coming three months with the fast-depreciating rupee leaving little room for policy stimulus. Further, with growth slowing further in the second quarter, the economy is unlikely to achieve the 7.6 percent growth the Finance Ministry projected for the current financial year, the economist observed.
Meanwhile, latest purchasing managers' surveys for manufacturing and services showed a slowdown in India's private sector activity, dismissing earlier hopes of a rebound in the economy.
India's industrial production increased at a significantly slower rate of 0.4 percent in the first quarter, as a 7.2 percent fall in capital goods output weighed on overall growth. Also, export growth slowed sharply and private sector credit growth remained sluggish during the quarter.
by RTT Staff Writer
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