India Insight

India GDP: What the economists are predicting

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.

Market-friendly Chidambaram toes socialist line with fiscal plan

The usually crisp and precise P. Chidambaram was uncharacteristically vague on Monday while announcing the government’s fiscal consolidation plan. While pledging to bring the fiscal deficit down to 3 percent in 2016-17 from around 5.3 this fiscal, the Harvard-educated minister gave no details on how the government would achieve this feat.

Perhaps the finance minister should remember that uncertainty and lack of clarity can spook markets and investors. We saw that when the government took months to clarify the controversial GAAR norms which made foreign investors jittery.

Chidambaram’s announcement is unlikely to impress investors, rating agencies and lenders like the IMF, who want the government to slash subsidies and cut spending.

Forget CRR cut, Subbarao should cut down his humour

Is Duvvuri Subbarao, governor of the Reserve Bank of India, considering an alternative career in stand-up comedy? In July, Subbarao tried to lighten the usually grey world of central banking with a self-deprecating wisecrack, linking rising prices and his receding hairline.

“I must admit that even at a personal level, I do not know how to interpret inflation. Twenty years ago when I had a thick mop of hair, I used to pay 25 rupees for a haircut … and now, when I have virtually no hair left, I am paying 150 rupees for a haircut,” he said at a conference.

That’s harmless, and pretty funny. But on Tuesday, the governor went a step further.