India's growth well below trend: Deutsche Bank

Says India's GDP grew by 7.3% in Oct-Dec 2015, reflecting a slowing growth momentum from the first half of this fiscal

India continues to report over 7% GDP growth, but its momentum has weakened and the country's growth is well "below trend", says a Deutsche Bank report.

According to the global financial services major, India's GDP and gross value added (GVA) grew by 7.3% and 7.1%, respectively in October-December 2015, reflecting a slowing growth momentum from the first half of this fiscal.


"India's growth is well below trend, irrespective of the over 7% growth reported as per the national accounts data," Deutsche Bank said in a research note.

According to data of the Central Statistics Office (CSO), the economy is expected to grow at a 5-year high of 7.6% in the current fiscal.

The CSO data showed that the economy grew at 7.6% in the first quarter, 7.7% in second and 7.3% in third.

"We find it difficult to make sense of the current GDP data, with ground reality and high frequency indicators such as IP, PMI, CMIE capex, business and employment surveys indicating a much weaker cycle," the report added.

It noted that though growth momentum has slowed in the second half of this fiscal year and that investment recovery remains anemic, support to growth is mainly coming from private consumption and this is likely to be the growth driver going forward as well.

"We maintain our GVA growth forecast for FY16 at 7.3%, while raising the GDP forecast to 7.5%," the report said, adding "we are however not changing our FY17 GDP growth forecast of 7.5%, which in our view is subject to downside risks."

The global brokerage firm said RBI will consider all the nuances in the national accounts data and will find enough justification to cut rates, once the Union Budget is out of the way in end-February.