Jan-Mar growth likely to remain weak: experts

Last Updated: Sun, Mar 03, 2013 07:33 hrs

Having touched a decade's low of 4.5% in the last quarter, India's economic growth in the current quarter to March is also likely to remain weak, say experts.

The GDP growth in the October-December quarter slipped to that low level, hit by poor performance of farm, mining and manufacturing sector and may lump more pressure on RBI to respond with an interest rate reduction on March 19.

"Industrial growth showed some uptick but continues to remain weak. We think weakness in activity will carry forward to Q1 2013 (January-March)," Goldman Sachs Managing Director and Chief India Economist Tushar Poddar said in a note.

Echoing similar sentiments, Credit Suisse Research Analysts Robert Prior-Wandesforde said: "Looking ahead, it is hard to be particularly optimistic about March quarter GDP given the heavy government spending constraints that are in place."

A Citigroup report said, "With April-December FY13 growth at 5%, growth in Q4 (January-March) would need to rise to 5% to meet the CSO's advance GDP estimate of 5%. We believe this is likely and maintain our view of a modest uptick in the coming quarters."

In its advance estimates for 2012-13, the CSO has projected economic growth rate of 5%, the lowest in the decade.

In the previous fiscal, GDP grew by 6.2%.

The economic growth in the first nine months of this fiscal (April-December) stood at 5.1%. The economy grew by 5.5% and 5.3% in the first and second quarters of the 2012-13 fiscal ending this month.

Regarding the monetary policy implications of the third quarter growth data, experts said the data is expected to put pressure on the Reserve Bank to respond with an interest rate reduction in its March 19 meeting.

"We continue to anticipate a 25 bps repo reduction, followed by another 25 bps cut on May 3," Credit Suisse said.

According to Citigroup, while the Current Account Deficit and elevated levels of retail inflation are a big concern, policymakers would find it difficult to ignore quarterly GDP readings in the 4% level.

"Thus, given the compulsions, we maintain our view of a modest 50 bps easing in 2013 with a cut likely on March 19," Rohini Malkani of Citi said a research note.

According to Goldman Sachs' Poddar, "It increases the probability that the RBI cuts the repo rate by 25 bps in its monetary policy meeting on March 19."

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