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Growth seen at 5.2 percent, says Moody’s

Published: 30th August 2012 08:36 AM  |   Last Updated: 30th August 2012 08:41 AM   |  A+A-

With GDP growth data for April-June quarter to be released on Friday, most economists and analysts expect it to be another quarter of below par performance by the Indian economy.

According to Moody’s, the domestic economy is likely to expand by 5.2% in the quarter ended June 30.

“There is some downside risk to this forecast, and it would not be a huge surprise to see 5% flat, but our model has been performing well in recent quarters so we will stick with the 5.2% forecast,” Moody’s added.

In case GDP growth comes at 5.2%, it will be the slowest pace of growth since early 2009.

“The difference this time is that the slowdown is largely due to domestic factors, whereas the 2009 slowdown was precipitated by developments abroad. The biggest problem is weak business confidence, weighed down by stubborn inflation, elevated interest rates, a weak global economy, and political gridlock and policy stagnation at the national level,” said Glenn Levine, Senior Economist, Moody’s Analytics.

For 2012, Moody’s has forecast GDP growth at 5.5%. India’s GDP growth had slumped to a nine-year low of 5.3% in the January-March quarter. For the entire fiscal, the growth had dropped to 6.5%. “The slowdown is well entrenched with most sectors of the economy growing below trend. The broader economy is clearly growing below potential,” Moody’s said.

Government has projected the Indian economy to clock a growth rate of 7.6% (plus/minus 0.25%) in 2012-13 fiscal.

“India’s high-frequency data are patchy at best, though the numbers can be used to piece together a picture of how the economy was running in the three months to June. Industrial output has been weak, as have local car sales and external trade,” said Levine.

India’s GDP growth fall is not just due to the global economic slowdown. Other macroeconomic indicators too haven’t been encouraging.

While June industrial output had contracted 1.8% compared to 9.5% growth year ago, inflation continues to haunt policymakers.

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