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India’s fourth quarter GDP growth likely slows to 7.2%: Moody's Analytics

29 May 2015 Evaluate

Ahead of the official release of the fourth quarter as well as for the entire fiscal 2014 Gross Domestic Product (GDP) data from the Central Statistical Organisation (CSO), global rating agency Moody's Analytics has said that India's economic growth rate in the January-March quarter is likely to slip to 7.2 percent from 7.5 percent in the previous three months, mainly on account of lower production and weak global demand.

Moody's while affirming the economy was growing much below its potential of closer to 9% has further stated that “Although India is among the world’s fastest-growing economies, we believe it is operating with a negative output gap,” it said. “External headwinds weighed on India’s March quarter GDP.

It also raised questions on the new GDP data series by the Central Statistical Organisation (CSO), which takes 2011-12 as the base year, saying that new data 'are dubious' as they do not align well with other indicators of economy. As per CSO's new GDP data, the Indian economy expanded by 6.9 percent in 2013-14 and for 2014-15 the growth is estimated at 7.4 percent. As per CSO's new GDP data, the Indian economy expanded by 6.9 percent in 2013-14 and for 2014-15 the growth is estimated at 7.4 percent. It has said that the revised methodology to the industrial production series, to be introduced in coming months, will better reflect the new GDP series.

Moody’s said that 'External headwinds weighed on India's March quarter GDP. The trade deficit widened, exports fell at double-digit in the opening months of 2015. Mixed global demand is partly to be blamed, while lower global commodity prices are also hurting exporter incomes.' It added that global factors apart, domestic issues are also concerning, as commercial banks have been reluctant to pass on the cuts in the benchmark lending rate by the Reserve Bank of India’s from earlier in the year.

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