India warned to beware gloating over China crisis

31 Aug 2015 | Author: | No comments yet »

Charts: At 7%, Q1 GDP throws up a negative surprise; RBI rate cuts imminent?.

India’s economy grew 7 percent during the first quarter of the current financial year, slower than 7.5 percent in the previous quarter but faster than 6.7 percent in the year-ago quarter. The new figures have come at a time when a slowing China is dragging down the global economy and there are doubts about India meeting its growth target.

Debopam Chaudhuri, chief economist & Vice President of Research at ZyFin Research, said, “We don’t see any significant recovery over the next two quarters with economic activity slumping further.” Out of eight industries, six have witnessed a fall in gross value added (GVA) growth at basic prices. Anis Chakravarty, senior director, Deloitte in India, meanwhile, noted that the GDP growth for the last quarter at 7.5 percent was accompanied by a GVA growth of 6.1 percent while in the latest print the GDP growth at 7 percent has come with a GVA growth of 7.1 percent. According to him, the pick-up in growth in construction bodes well for the coming quarters. “The latest numbers depict an economy that is in the early stages of recovery and is showing modest improvements,” Chakravarty said. The table above shows that private consumption expenditure (or household demand) and the government’s corresponding number are 61.3 percent and 11.9 percent.

It is the decline in output of crude oil, natural gas and steel that contributed to the sharp contraction. “From the looks of it, it seems to be suggesting a further deceleration from last quarter, which in our view clearly paves the way for two more repo rate cuts before the close of the financial year,” Jyotinder Kaur, principal economist, HDFC Bank, told Reuters.

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