Mumbai: The economy’s robust growth is expected to have slowed a bit in the third quarter of 2007 as the effects of previous policy tightening measures filtered down into the broader economy, analysts said on Monday.
Annualized growth is expected to slow to around the 8.6-8.7% levels in the July-September quarter, from 9.3% in the previous quarter, analysts at JP Morgan and DBS said. Data is due on Friday.
“The cumulative impact of monetary tightening in the last few quarters, along with the likely impact of rupee appreciation on exports, is likely to moderate the pace of growth for the rest of the year,” JPMorgan’s Gunjan Gulati and Rajeev Malik said.
While the economy has grown at an average rate of 8.6% in the last four years, high growth has been accompanied by a rise in inflation, forcing policymakers to take stiff measures to balance the growth.
The central bank has raised interest rates five times since June-2006 and increased banks’ cash reserve requirements by 250 basis points since last December.
While interest-sensitive sectors such as consumer durables have been hit the most, higher spending on capital expenditure and infrastructure will, to some extent, offset the slowdown, JP Morgan said.
Spending on the services sector, which account for more than half of the economy, is also expected to have remained robust, driven by strong wages, DBS said It expects growth at 8.6% in the third quarter.
While JP Morgan expects the economy to grow at 8.6% in 2007-08, slower than the 9.4% rise last year, the Singapore-based bank expects growth at 8.4%.