India GDP: What the economists are predicting

May 29, 2013

Investors and policymakers will be closely watching India’s fourth-quarter and full fiscal year 2012/13 gross domestic product (GDP) growth figures on Friday.

The economy grew 4.5 percent in the December quarter, but a Reuters poll has shown that Asia’s third-largest economy will likely perform a little better and expand by 4.8 percent in the quarter that ended in March.

For the financial year 2013, the government had estimated the economy will grow 5 percent, the lowest in a decade. However, if the poll consensus proves right, full-year growth will be worse than the government’s estimate.

This economic data will set the tone for further interest rate action by the Reserve Bank of India, especially in the current scenario where hopes of a rate cut have risen after inflation fell below 5 percent in April.

Here are some growth estimates and outlook from investment banks:

J.P.MORGAN: The investment bank expects January-March growth at 4.9 percent as compared to 4.5 percent in the previous quarter, largely on the back of a recovery in services. This will bring growth for the full fiscal year to 5 percent, down from 6.2 percent in the previous financial year, the bank said. “From the expenditure side, improved net exports and a modest upturn in investment should be the growth drivers. Much of this is anticipated by the market and the government and thus is unlikely to cause any flutter,” economists at JP Morgan wrote in a note to clients.

CREDIT SUISSE: India’s growth for the Jan-March quarter is expected to remain soft at 4.8 percent, due largely to a reduction in government spending, the investment bank said in a note. “We are hopeful that the lower interest rate environment and improving investment should result in better growth numbers from the June quarter,” the report added.

STANDARD CHARTERED: StanChart expects fourth-quarter GDP grew 5 percent, primarily because of a lower statistical base from a year ago. The investment bank also expects some upward revision in recent quarterly GDP releases, pushing the full-year GDP for the financial year ending March 2013 to 5.2 percent. “Activity indicators have stayed weak and an uptick in the Q4 FY13 GDP data could provide comfort by indicating that growth has found a floor,” it said.

NOMURA: GDP growth expected to remain subdued at 4.5 percent for the March-quarter due to the pullback in government spending, weaker consumer demand and subdued investment, economists said.

BARCLAYS: Economists at Barclays estimate that GDP growth will remain weak in the fourth quarter and will come in at around 4.9 percent, which points to full-year GDP growth of 5 percent. “We think economic momentum will remain weak in the near future,” Barclays said in the note. “The likelihood of continued fiscal austerity, along with weakness in typically resilient segments of the economy, such as the domestic services sector, suggests sluggish economic activity for a while”.

CREDIT AGRICOLE: The brokerage expects GDP growth for financial year which ended in March at 5 percent, on the back of an improved trade position and stronger government spending. This outcome could help relieve investors’ concerns over the growth outlook, especially regarding the still-slow investment cycle, it said in a note.

(Yati Himatsingka from Bangalore contributed to this post. You can follow Aditya on Twitter @adityayk and Yati @ReutersYati)

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