The Indian economy likely accelerated in the second quarter of 2014. We expect GDP growth of 5.1%- Moody's Analytics

Most parts of the economy are improving. Capital expenditure could surprise on the upside, we anticipate a steady return to potential growth by 2016

India's Slow Cyclical Upturn

India's new Prime Minister, Narendra Modi, has taken office at an opportune time. The economy is in the early stages of a cyclical upturn, albeit a slow one, after GDP growth languished under 5% for the better part of two years. Even without much government help the economy should grow by around 5% this year and close to 6% in 2015. An improving economy, coupled with Modi's strong electoral mandate, provides an ideal platform from which to implement his agenda.

Second quarter GDP figures due later this week are expected to show the beginnings of this cyclical improvement. Industrial production is growing at a solid pace and should be mirrored in the cyclical upturn in GDP. Exports and imports have also rebounded. Business investment could surprise on the upside. Confidence lifted with the May election result, and production of capital goods has surged in recent months. We expect GDP growth hit 5.1% in the three months to June. However, this is still well short of potential GDP growth, which is currently around 6% but could easily lift towards 7% with some modest economic reforms.

Powered by Capital Market - Live News