Outlook weak for India economic growth: analysts
Here are some comments on Indiaâ€™s economic growth released by investment banks after the recent GDP data:
JP Morgan: The investment bank said the next quarter could be worse. JP Morgan now expects Indiaâ€™s FY14 GDP to grow at 4.1 percent.
â€śGrowth will likely get a boost from a strong monsoon and an expansive food security bill later this year. But the stagflationary shock from the rupee depreciation over the last three months and high interest rates are expected to be a key drag on growth and stress on unhedged corporate balance sheets,â€ť analysts wrote.
Goldman Sachs: The investment bank downgraded India’s GDP forecast to 4 percent from 6 percent for the current financial year and to 5.4 percent from 6.8 percent for the financial year ending in March 2015.
“We think that there could be some risks of near-term overshooting of our targets if economic and financing conditions worsen, and especially if there are pressures on the banking and corporate sectors due to weakness in growth,” it said.
Scotiabank: There is an increasing possibility that Indiaâ€™s GDP growth in the current financial year may not reach its forecast of 5 percent, Scotiabank said. â€śIndiaâ€™s economic performance is challenged by a high cost of financing, a difficult business environment, and still-weak global demand conditions,â€ť it said in a note.
HSBC: The investment bank slashed Indiaâ€™s GDP growth forecasts to 4 percent from 5.5 percent for the current financial year. HSBC said they do not expect to see signs of recovery until the fourth quarter of the current financial year.
â€śThis is not the bottom. High-frequency indicators, such as HSBCâ€™s PMI indices and business sentiment indicators, suggest that the growth momentum eased further during the July-September quarter in both the manufacturing and services sectors. Why? For one, the reform announcements have yet to translate into action on the ground. Moreover, the RBIâ€™s currency stabilization measures have raised funding costs. Finally, heightened macroeconomic uncertainty is making,â€ť it said in the note.
DBS: In a research note, DBS said: â€śLooking ahead, signs are of a correction in the economyâ€™s trend growth. Apart from government spending, there is little reason to be optimistic of a recovery in the other domestic demand components, despite the food security bill and infrastructure projects.â€ť
Nomura: The investment back last week cut its outlook for Indian economic growth for the second time since the start of July. After cutting Indiaâ€™s GDP forecast for FY14 to 5 percent from 5.6 percent on July 19, economists at Nomura have now hacked their GDP growth estimates down to 4.2 percent. The bank reinforced its negative view on Indiaâ€™s macroeconomic outlook for the next three to six months.
â€śWith fiscal pressures building, the government will likely be unable to continue its current pace of spending without risking substantial fiscal slippage, implying spending will have to be sliced in the second half of FY14â€ť.