‘Balance of payments,rupee depreciation and high interest rates to pose a drag’.
The government may believe that economic growth bottomed out in the April to June quarter of this fiscal,but fresh macro economic data pouring in have made a host of private analysts more cautious,who have now scaled down Indias GDP growth forecast to below 4.5 per cent for 2013-14. Indias manufacturing sector contracted for the first time in August this year in more than 50 months,according to an HSBC survey.
The HSBC/Markit purchasing managers index (PMI) for the manufacturing industry stood at 48.5 in August,lower from 50.1 in July,indicating an overall contraction. This is the first sub 50 reading the PMI since March 2009.
Manufacturing activity contracted in August for the first time since March 2009. This was led by a decline in new orders,especially export orders, HSBC chief economist for India and ASEAN Leif Eskesen said. HSBC on Monday also trimmed Indias GDP forecast to 4 per cent for the current fiscal and 5.5 per cent for 2015. It had earlier estimated the Indian economy to grow at 5.5 per cent in 2013-14 and at 6.6 per cent next fiscal.
But,this is not the bottom. High-frequency indicators,such as HSBCs PMI indices and business sentiment indicators,suggest that the growth momentum eased further during the July-September quarter in both the manufacturing and services sectors, Eskesen said in a separate note,adding that reform announcements are yet to translate into action. Further,consumers and business have become cautious about spending on the back of heightened macro economic uncertainty.
According to official data released last Friday,the Indian economy grew at an estimated 4.4 per cent in the first quarter of this fiscal though Prime Minister Manmohan Singh said it is likely to see some revival over the next three quarters and growth could touch 5.5 per cent in 2013-14.
HDFC chairman Deepak Parekh said there is good news only on the agriculture front where growth is projected at 4 per cent this fiscal. Money is going out of India with a negative outlook on FII debt. Internationally,confidence in India has gone down,which is reflected in the rupee, he said at Motilal Oswal Annual Global Investors Conference.
Global financial services firm Nomura has cut Indias GDP growth projection for the current fiscal to 4.2 per cent from the earlier 5.5 per cent and has kept a negative view on the countrys macro-economic outlook for the next three to six months due to higher than anticipated tightening in the financial conditions. Looking ahead,good monsoons and a gradual recovery in global demand are positives,but the question is whether they will be able to offset the drag from the ongoing balance of payments stress, Nomura Indias economist Sonal Verma said in a note.
JP Morgan too has slashed Indias GDP growth forecast to 4.1 per cent from its earlier projection of 5.1 per cent in the current fiscal on concerns over the sharp fall in the rupees value and high interest rates.
Key infrastructure sectors grow by 3.1% in July.
New Delhi: The eight key infrastructure industries grew 3.1 per cent in July,the highest since April,on the back of better performance by the steel,refinery products and electricity sectors.
However,the growth was lower compared to 4.5 per cent growth registered in July during the same period a year ago.
The performance of the core sector will be reflected in the IIP to be released on September 12.
While in April and May the growth of the core sector was 2.3 per cent each,it inched up merely 0.1 per cent in June.
The growth for April-July period was 1.9 per cent.
During the month,the production in crude oil and natural gas declined by 2.3 per cent and 16.1 per cent,respectively.
Coal,fertiliser and cements barely grew 1.2 per cent,0.4 per cent and 0.8 per cent,respectively. ENS
Will deal with challenges one at a time: Rajan.
New Delhi: Faced with declining value of the rupee and widening CAD,RBI Governor-designate Raghuram Rajan today said there is no magic wand to solve the challenges before the country overnight and he will endeavour to deal with them one at a time.
Rajan,50,who has been in the finance ministry as the chief economic adviser for barely a year,will replace D Subbarao as RBI Governor who demits office on September 4.
“We have enough ideas. It is not just the currency,it is financial inclusion,it is growth. I think there is a lot to do. There are challenges in the economy… These things are not going to be overcome overnight. There is no magic wand. But there are undoubtedly solutions to many of the problems that the RBI can tackle and the job is to go ahead and do it. We will do it one step at a time. Make sure that it progresses everyday,” he told reporters. PTI