India's economic growth is estimated to have slowed markedly in the second quarter as lack of effective policy measures and a slump in industrial production have dragged economic activity, Capital Economics Senior Global Economist Andrew Kenningham said Tuesday.
Capital Economics expects India's growth to slow to 4.5 percent sequentially in the second quarter from 5.3 percent in the first quarter. Slower growth, combined with heightened inflationary pressures and flat industrial production, will give the Reserve Bank of India enough room to cut the repo rate by a maximum of 50 basis points by year-end, it said.
The firm noted that poor monsoon, possible increases in administered fuel prices and the lagged effects of rupee depreciation are seen keeping price pressures high, and inflation is expected to end the year at about 7 percent.
According to the economist, the Indian government is expected to announce some measures to slow the increase in its budget deficit, and perhaps to review the controversial tax legislation.
India's industrial production decreased modestly from last year in the second quarter, driven mainly by a 19.6 percent fall in capital goods output. Provisional data showed that Indian exports fell by 14.8 percent year-on-year in July.
Data from the government today showed that headline wholesale price inflation slowed to 6.9 percent in July from 7.3 percent in June, hitting the lowest level since late 2009. However, core inflation increased to 5.4 percent from 4.8 in the previous month.
by RTT Staff Writer
For comments and feedback: email@example.com