(Corrects typo in word “than” in first paragraph)
* GDP for July-Sept grew 5.3 pct y/y, versus 5.4 pct
forecast
* Manufacturing almost flat at 0.8 pct y/y, farm growth 1.2
pct
* Government faces opposition to economic reforms
By Rajesh Kumar Singh
NEW DELHI, Nov 30 (Reuters) – The Indian economy extended
its long slump in the quarter ending in September, with
lower-than-expected growth keeping it on track for its worst
year in a decade and underscoring the urgency of politically
difficult reforms to spur a revival.
Quarterly gross domestic product (GDP) grew 5.3 percent from
a year earlier, provisional government data showed
on Friday, below the 5.5 percent posted in the three months
ended in June and less than a Reuters poll of economists had
forecast.
The number matched the performance of Asia’s third largest
economy in the January-March quarter, which was the weakest
growth rate in three years.
“The growth is bottoming and we will see an improvement from
here, though not a very strong improvement,” said Robert
Prior-Wandesforde, Director, Asian Economics Research, Credit
Suisse in Singapore. Market reaction to the data was muted.
Growth was dragged down by subdued manufacturing output
growth of 0.8 percent on the year and farming output of 1.2 pct.
The number was lower than indicated by Finance Minister P.
Chidambaram last week when he warned that India faced a “a
difficult situation” and needed innovation to boost output.
Low growth is making it harder for Chidambaram to rein in a
wide fiscal deficit, which global ratings agencies say needs to
be controlled if India is to avoid losing the investment grade
designation on its sovereign debt.
A growth rate below 6 percent for the third quarter in a row
is damaging for a country that aspires to near double-digit
expansion to provide jobs for its burgeoning population.
The slump also makes it tougher for Prime Minister Manmohan
Singh to fund flagship welfare programmes ahead of a national
election due in mid-2014.
ECONOMIC REFORMS
The crisis prodded Singh into shedding years of policy
inertia to launch some of the most daring initiatives of his
tenure in September, including raising subsidised diesel prices
and opening sectors like supermarkets to foreign players.
But analysts say India needs to take more steps quickly,
including speeding up approval for infrastructure projects,
overhauling the tax system and reducing its swollen deficit to
revive capital investment.
Many G20 central banks have been moving to support growth
through monetary stimulus, but stubbornly high inflation has
made it tough for the Reserve Bank of India to reduce borrowing
costs.
The next monetary policy review is due on Dec. 18, but the
bank has said any interest rate cut is “highly improbable” at
that meeting. The low number raised expectations of some
monetary loosening, however.
“The growth is below the Reserve Bank of India’s trend
growth expectation, and I think the central bank will cut rates
further from here,” said Credit Suisse’s Prior-Wandesforde.
“I expect a repo rate cut in January and there could
possibly be another cash reserve ratio cut in December.”
Chidambaram told Reuters earlier this month that economic
growth for the current financial year that ends in March could
be as low as 5.5 percent. India’s economy has not grown at less
than 6.5 percent since the 2002/3 fiscal year.
(Reporting by Manoj Kumar and Arup Roychoudhury in NEW DELHI
and Shamik Paul in MUMBAI; Writing by Frank Jack Daniel; Editing
by Alex Richardson)
