Barclays lowers India growth forecast to 6% for FY14
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Barclays lowers India growth forecast to 6% for FY14

Last Updated: Tuesday, May 21, 2013, 16:02
 
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Barclays lowers India growth forecast to 6% for FY14
New Delhi: Brokerage firm Barclays Capital on Tuesday lowered India's growth forecast to 6 percent for 2013-14, from earlier projection of 6.2 percent, citing "recent disappointments" in economic activity.

"We fine tune FY13-14 GDP growth forecast to 6 percent (from 6.2 percent earlier) to reflect the recent disappointments in activity indicators," Barclays Capital said in a research note

The brokerage firm further cautioned that there is a possibility of further downside risks to growth, especially in the near term as RBI's policy interest rate cuts in recent months has not been translated into reduction in bank lending rates. Moreover the government is likely to continue with its fiscal austerity moves.

The likelihood of continued fiscal austerity, along with weakness in typically resilient segments such as domestic services, suggests sluggish economic activity for a while, Barclays said.

"We would also not dismiss the possibility of further downside risks to growth, especially in the near term," the report added.

India's Q3 12-13 GDP grew a mere 4.5 percent y/y, fuelled largely from the government's austerity drive to control the fiscal deficit, Barclays said.

Spending curbs by the government have generated further downside to the already weak growth momentum. Moreover, several other indicators (like industrial production, core industrial growth, PMI, vehicles sales, government spending) remained weak, even during the early months of 2013.

According to Barclays GDP growth remained weak in Q4 12-13 (January-March) at around 4.9 percent, which points to FY 12-13 real GDP growth of 5 percent.

On policy rate cuts, the report said continued downside surprises in inflation prints (both WPI and CPI), weaker than expected recovery in growth, and spending curbs by the government have created room for deeper monetary easing.

"While our expectation of another 25 bp cut by the RBI on June 17 remains, we now expect a further 50 bp reduction in the repo rate in H2 13," the report said.

PTI



First Published: Tuesday, May 21, 2013, 15:59


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