Will India's Q4 GDP growth plunge below 6%?

If Moody’s Analytics’ prediction turns out to be correct, this week could end on a very gloomy note for the already sagging economy.

The research arm of the ratings agency predicts India’s gross domestic product (GDP) for the fourth quarter of the financial year ending March 2012 (January-March) could log in at 5.9 percentfrom a year ago, the slowest in three years.Fourth-quarter GDP numbers are due out on 31 May.

That, probably, is the most dire prediction. Most economists expect India’s GDP to expand by 6-6.1 percent in the March-ending quarter, dragged down by weak industrial output data, particularly in March.Standard Chartered, for instance, expects India to report an annual growth rate of 6 percent during January-March , below its earlier expectations of 6.5-7 percent.

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Clearly, all those hopes of India achieving 7 percent growth or more are turning out to be just that - hollow hopes.Even for the 12 months ending March 2o12, the expectation is that the economy will expand by 6.9 percent – just below that 7 percent mark.

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Don’t hold your breath for a better performance in the current financial year (2012-2013).

A slew of downgrades from Morgan Stanley, Goldman Sachs and Citigroup indicate that expectations of growth in 2012 or through March 2013 have also been lowered to between 6.5 percent and 6.9 percent, as this _Firstpost_ story notes.

The bad news here is those estimates may still be on the optimistic side.Because along with an industrial slowdown, there are growing fears that things could soon start going wrong in the farm sector as well.

A Business Standard report warns that the dreaded “El Nino” phenomenon is set to make an appearance in the second half of the monsoon season, which may cause lower-than-expected rains in August and September. The newspaper said the last time El Nino made an appearance in 2009, the country faced a severe drought. (The El Nino phenomenon basically reduces rainfall.)

While the intensity of the phenomenon is as yet unknown, the report said it had the potential to hit paddy, oilseeds and pulses output. That could lift food prices again, and keep the pressure on inflation. The rupee’s steep drop against the US dollar will also add to inflationary pressures. These, in turn, will restrict the Reserve Bank of India’s ability to cut interest rates to boost economic growth.

In the absence of economic reforms, India’s growth could spiral even lower than currently estimated.

Yes, gloomy days for the economy ahead.