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India's Q3 growth numbers 'under-recorded': Credit Suisse

Last Updated: Saturday, March 2, 2013 - 10:19

Mumbai: Brokerage house Credit Suisse has said the October-December quarter GDP reading of 4.5 percent is possibly "under-recorded".

"In our view, there are some reasons to believe that the GDP growth is being under-recorded as none of the published survey data point to anything like the kind of weakness that was reported yesterday," the investment bank's economist Robert Prior-Wandesforde said in a note to his clients on Friday.

"The Q3 GDP growth is the lowest number since the March quarter of 2009 which was the height of the global financial crisis when GDP rose just 3.5 percent," he said.

Prior-Wandesforde pointed to a recent Dun & Bradstreet survey that showed business optimism rising from around the middle of the past year.

Yesterday evening, the government released the Q3 GDP numbers, which reported a worse-than-expected growth rate of 4.5 percent in the three months to December. GDP had grown 6 percent in the same period last fiscal. With this the economic growth in the first nine months stood at a poor 5.1 percent, a decadal low, against 6.6 percent a year ago.

Prior-Wandesforde said the CSO data would "surely lump more pressure" on the RBI to cut interest rates at the March 19 policy review. He also said Credit Suisse sees a 25 basis points cut next month, followed by an equal reduction on May 3, when the central bank will announce annual monetary policy.

Credit Suisse also said a breakdown of the Q3 GDP data is better than the headline numbers, saying "all these numbers need to be taken with a sizable pinch of salt given the frequency and scale of revisions that can be made."

For instance, it said, while investment spending shrunk only 1 percent in the quarter, the same grew 4.1 percent in Q2.

Terming the 6.1 percent rise in the services sector as "the real shock," Prior-Wandesforde said this is the lowest since the March quarter of 2001.


First Published: Saturday, March 2, 2013 - 10:16
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