India Q4 GDP to slow to 6%: StanChart
The economic growth in the January March quarter will be around 6 per cent against an initial market expectation of 6.5-7 per cent due to sharp contraction in industrial production coupled with policy inertia, a research report by Standard Chartered Bank has said.
"We expect GDP growth to have slowed to 6 per cent in Q4 from 6.1 per cent in the previous quarter, thwarting initial market expectations (including ours) of an improvement to 6.5-7 per cent y-o-y," the report said.
Elaborating the reasons behind the dip in growth, the report also said that contraction in March IIP, slower production of capital goods, weaker consumption trend would be the key reasons behind fall in GDP.
It also noted that industry has long suffered from policy inertia, high inflation, high interest rates, supply bottlenecks and slowing global demand, which had reflected in March IIP numbers, which in turn will pull down GDP growth numbers in the fourth quarter of last fiscal.
The factory output data shrank 3.5 per cent in the last month of the last fiscal.
The research report also said that services sector would also report slowdown in Q4 of FY12.
"In Q3 of FY12, its (services sector) growth (8.9 per cent) slipped below 9 per cent for the first time in two years, and the second time in seven years. We expect growth to have slowed further in Q4 to 8.7 per cent y-o-y, for several reasons," the report said.
It, however, added that a marginally better performance in the financial sector as credit offtake improved probably provided some support in the last quarter of FY12.
Referring to monetary policy actions going ahead, the report said that the central bank may cut repo rate by 25 basis points (0.25 per cent) on June 18 as a measure to prop up the economy.
"Non-food and non-fuel inflation (core inflation) printed below 5 percent for a second consecutive month in April 2012.
"This is likely to allow the RBI to cut the repo rate by another 25bps (from the current 8.00 percent) on 18 June, at its first mid-quarter monetary policy review of FY13," it said adding slower global commodity prices and increased concerns about the euro area will also support a rate cut.
SOURCE: financialexpress.com
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