Barnabas Gan, Economist at UOB Group, assessed the prospects of economic growth in India.
“India’s GDP growth decelerated for its sixth quarter by just 4.5% on a year-on-year basis in the July to September quarter in 2019, marking its slowest pace since early 2013. This is a stark slowdown from its 9% growth handle just three years ago, and the weakest on record under Prime Minister Narendra Modi’s watch”.
“The low rate of expansion was dragged by a weak manufacturing sector, falling consumer demand, and sustained lacklustre private investments. Importantly, India’s external environment continues to pale as the US-China trade tensions wears on”.
“Given the sustained slowdown in India’s economic growth, we keep our GDP outlook at 6.0% for the current fiscal year with downside risks. This is slightly more bearish compared to RBI’s latest revision for GDP growth to come in at 6.1% y/y (down from its initial expectation of 6.9%). Moreover, RBI had maintained its accommodative stance in its last MPC report and highlighted the need to ease policy with the objective of achieving the ‘medium-term target for CPI inflation of 4% within a band of +/- 2% while supporting economic growth’. As such, in light of a soft growth environment, we continue to expect RBI to reduce rates by another 25bps in its upcoming 5 December MPC meeting.
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