India growth stuck on downward trajectory
WITH FIGURES IDLING BELOW 5% YET AGAIN, EXPANSION MAY CONTINUE TO STRUGGLE
India’s economic growth probably held below 5 per cent for a fourth straight quarter, the longest stretch in data going back to 2005, as Prime Minister Manmohan Singh struggles to boost investment and tame elevated inflation.
Gross domestic product rose 4.6 per cent in July through September from a year earlier, compared with 4.4 per cent in the prior quarter, according to the median of 25 estimates in a Bloomberg News survey ahead of a report due on Friday.
Expansion may continue to struggle, with Goldman Sachs Group Inc predicting last week that the central bank would further raise interest rates while the government faces pressure to curb spending and shrink the budget deficit. Exports have provided a bright spot following a drop in the rupee, cushioning factory output from moderating demand among India’s 1.2 billion people.
“Growth will remain in a low gear,” said Radhika Rao, an economist at DBS Bank Ltd. in Singapore, referring to the second half of the fiscal year ending in March. “The odds of expenditure restraint are high as India has to prevent a creditrating downgrade that would disrupt foreign investment.”
A reform- minded administration must emerge from general elections due by May for expansion to exceed 5 per cent in the year ending March 2015, Rao said.
The rupee, down about 12 per cent in the past year, strengthened 0.6 per cent to 62.495 per dollar at the close in Mumbai yesterday.
Goldman Sachs expects Ra- ghuram Rajan to raise the policy interest rate to 8.5 per cent next year from 7.75 per cent, adding to two increases of a combined 50 basis points since he became governor of the Reserve Bank of India in September .—