India braced for disappointing growth figures

India braced for disappointing growth figures

New Delhi: India is expected to post its slowest economic growth in six financial quarters on Tuesday with output weakening as a result of the longest stretch of monetary tightening in a decade.

Asia’s third-largest economy is estimated to have expanded 7.6% from a year earlier in the fiscal first quarter, according to the median estimate in a Dow Jones Newswires poll of 17 economists.

The forecast is lower than the 7.8% expansion logged in the January-March period as well as the 9.3% growth posted in the first quarter of the previous fiscal year.

While around 7% expansion might seem lofty compared with tepid Western growth, economists say slower growth would undermine government efforts to tackle endemic poverty.

India’s Central Statistical Organisation (CSO) will announce gross domestic product (GDP) figures at 11 am.

“Industrial output growth has been on a sustained downtrend," said Capital Economics ahead of the data.

Last week, the Reserve Bank of India (RBI), which has hiked interest rates 11 times in 18 months as it struggles to curb near double-digit inflation, warned of “a difficult year from a macro-economic perspective".

The growth figures come as Congress-led UPA government has been hamstrung by huge public protests against widespread corruption.

Investors are now waiting to see whether the government moves ahead with any of its long-awaited economic reforms in the final week of the current parliamentary session that economists say are key to powering growth.

The government, under siege over multi-billion-dollar corruption scandals, at the weekend finally put an end to the protests by acceding to the demands of a 74-year-old hunger striker Anna Hazare to tackle graft.

The central bank said last week that growth prospects for the current fiscal year to March 2012 seem “subdued compared to the previous year", when the economy expanded by 8.5%.

Some economists expect growth in the low 7% range as rate hikes bite and private investment slows.

Economists say that the central bank, which said last week that it was not willing to accept inflation of 9.22% as “the new normal", could raise rates again at its next policy meeting in September.

On Monday, a survey by the Federation of Indian Chambers of Commerce and Industry (Ficci) showed Indian business confidence had slumped to a two-year low with companies rattled by a decelerating domestic and global economy.

The survey, covering sectors from textiles to consumer goods, reflected “growing apprehensions about the world economy entering into another recession", said the business group.

“At the domestic level, rising interest costs and weak domestic demand -- both in part attributable to the contractionary monetary policy pursued by the Reserve Bank of India -- are taking their toll," it added.