India’s GDP Growth Slows More Than Expected


Recent updates for India are showing further deterioration of its economy. In the first three months of 2013, the GDP growth slowed to 4.8 percent; the ninth consecutive quarter of expansion below 8 percent.

The predictions of the India’s finance ministry that the economy is likely to expand between 6.1 and 6.7 per cent in the fiscal year to March 2014 may prove difficult to achieve. Manufacturing remains stunted, gridlocked by the high cost of capital, the high price of energy and underdeveloped infrastructure. Trade deficit continues to be elevated with exports suffering from the slowdown in global demand and imports of oil and gold continuing to stay high. On the positive side, the inflation rate decreased to 4.9 percent in April, allowing the central bank to reduce the borrowing cost to 7.25 percent. In addition, the Indian government has introduced pro-business economic reforms, namely allowing marginal increases on fuel prices and promoting foreign direct investment on various sectors. More importantly, new budget for 2013/14 fiscal year outlined plans to increase spending on capital investment and large-scale social programs by 29 percent, while imposing a one-year 10 per cent tax surcharge on the “super-rich”. 


In the first quarter of 2013, India's economy grew 4.8 percent, only slightly up from 4.7 percent in the previous period, hurt by a slowdown in agriculture, mining and manufacturing.


In March, industrial production grew 2.5 percent, up from 0.5 percent reported in February. In April, the manufacturing output expanded at its slowest pace in 17 months.


In March, India's trade deficit narrowed to INR 561B. Exports rose 11.5 percent yoy while imports grew 14 percent.

After speeding up in February, wholesale-price index fell in March and April. In April, The Reserve Bank of India cut its main interest rate for the third time in five months as it looks to revive its sluggish economic growth.


Anna Fedec, anna@tradingeconomics.com
5/31/2013 1:03:20 PM