GDP data highlights the weakening economy: experts
Expect the INR to fall further, to fresh record lows, on the data
India's annual economic growth slumped in January-March to a nine-year low of 5.3% as the manufacturing sector contracted and a fall in the rupee to a record trough suggests the economy remains under pressure in the current quarter. Following are some of the experts commenting on the data.
Dariusz Kowalczyk, economist, Credit Agricole CIB, Hong Kong
"The data highlight the unusual degree of weakening of the country's economy, likely driven by poor investment and widening trade gap.
"The data also poses a dilemma for policy makers, as they have no fiscal room to stimulate growth, while monetary easing scope is very narrow, at least for now, due to rebounding and high inflation.
"Further weakening of the INR could help a bit, but the key problem is lack of investment, caused by sub-optimal macroeconomic policy making and discouraging policies towards foreign investment.
"We expect the INR to fall further, to fresh record lows, on the data. We also expect a decline in INR OIS, because decelerating growth will, at some point, help curb inflation, enabling some more monetary easing."
Anubhuti Sahay, economist, Standard Chartered Bank, Mumbai
"Shocking numbers as Q4 FY12 GDP growth was even lower than lows witnessed during the financial crisis. A rate cut is a given now. We expect a 25 bps reduction in repo rate on June 18."
Shakti Satapathy, fixed income strategist, AK Capital, Mumbai
"The Q4 data was quite disappointing and reiterates a reflection of sluggish manufacturing data. However, the service output is showing resilience denying a further head down in the economy. Though the weak data and consistent global worries would keep the sentiment negative in the near term, we expect the June 18 (RBI) policy would primarily be a non-event in terms of rate cut."
Sujan Hajra, chief economist, Anand Rathi securities, Mumbai
"Our sense is that growth will be subdued in the first half of the current fiscal year. However, if the government takes some positive steps immediately, we still think growth in 2012-13 will be better than 2011-12.
"The Reserve Bank of India has already adopted pro-growth policy. But inflation is not softening, so it cannot do a significant rate cut. We think they will focus more on making liquidity surplus."