India GDP headed for decade-low, but rate cut unlikely in Dec

India's GDP growth was stuck at a three-year low of 5.3 percent in July-September in line with expectation, the government data showed today.

Various polls had estimated the growth in the 5.2-5.4 percent during the quarter.


The growth in construction was 6.7 percent, trade, hotels, transport and communication at 5.5 percent, financing, insurance, real estate and business services at 9.4 percent, and community, social and personal services at 7.5 percent, the press release said.

Agriculture, forestry and fishing grew 1.2 percent, mining and quarrying 1.9 per cent, manufacturing 0.8 percent, electricity, gas and water supply 3.4 percent.

In April-June, the growth was 5.5 percent. And in January-March it was 5.3 percent.

Analysts, however, said the growth numbers do imply a positive sign for the economy but they do not expect the RBI to cut rates in December, given that the numbers are in line with RBI's estimates.

They were also unanimous on the fact that the economy is unlikely to grow below 5 percent from now on, even though the improvement may not be very strong.

Anjali Verma,analyst at MF Global said "The number is slightly better than my 5 percent forecast, primarily driven by agriculture. However, there is no overall improvement in macro numbers and services had another disappointing quarter."

"The second quarter GDP numbers imply consolidation and stabilisation in economy, but not a recovery as such, said Sonal Varma, chief economist at Nomura.

Varma expects the GDP growth to remain 5.3 percent in the third quarter and 5.5 percent in the fourth quarter.

C Rangarajan, chairman of the prime minister's economic advisory council, expects growth to pick up in the third and fourth quarter. " We expect a growth rate of 5.5 percent and above," he told CNBC-TV18 in an interview.

He pegged the FY13 GDP growth at around 5.5-6 percent and expects the FY14 growth to be 1 percentage point higher than the FY13 figure.

The Sensex extended gains to 0.4 percent from 0.3 percent before the data release. The rupee was at 54.54/56 to the dollar against 54.61/64 previously.

The 10-year bond yield was at 8.17 percent, unchanged after the data.

You can read the entire press lease on the Q2 gross domestic product here.

Updated Date: Dec 20, 2014 14:24 PM

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