India GDP Growth is Shrinking

December 1st, 2011
in econ_news

Econintersect:  The September quarter GDP growth for India slowed to 6.9% in the second quarter of 2011.  This was the lowest reading in more than two India-flagyears.  The prior excursion into growth below 7% occurred while the U.S. was still officially in its Great Recession from December 2007 to June 2009.  Factors mentioned holding India’s growth rate down (from The Times of India) included stubborn inflation, policy delays and a weak global economy.  The Times also reported that further slowdown was expected by economists in the coming quarters.

Follow up:

Some details from the data released by the Central Statistics Office on Wednesday (December 1) showed the economy grew 6.9% in the September quarter, slower than 8.4% in the same year-ago quarter and 7.7% expansion in the April-June quarter.  Separate data showed the key infrastructure sector slowed to a 5-year low at 0.1% in October piling more pressure on the government and policymakers.

The government was trying to put a good spin on the reported numbers as indicated in this excerpt from The Times of India:

But finance minister
Pranab Mukherjee said he is confident that the economy would be able to recover some of the loss in growth momentum in the months ahead as there are some encouraging signs.

The minister said the government is committed to its indicated fiscal balance for the year 2011-12. "We are monitoring our resource mobilization efforts as well as our expenditure. We will not hesitate to take the required correctives to remain on the path of fiscal prudence so that the short to medium-term growth prospects are not undermined," a finance ministry statement quoted Mukherjee as saying.

Economists said they expect the
Reserve Bank of India to pause in its interest rate tightening cycle given the growth moderation.

"Overall, measures have to be undertaken to stimulate the stalling investment activity which otherwise would have more medium term adverse implications on growth. Given the continuing slowdown in growth, we expect the RBI to maintain a pause in the forthcoming policy meeting in December," said Upashna Bharadwaj, economist at
ING Vysya Bank

Sources: The Times of India via GEI Asia/Pacific Newspaper page

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