India’s growth rate slows, courtesy of the Reserve Bank
India’s GDP growth drops to 6.9 from 8.4 per cent over last fiscal year. The Reserve Bank of India says it will lower interest rates unless the government reduces the deficit and begins economic reforms.
New Delhi (AsiaNews/Agencies) – India’s GDP growth will slow to 6.9 per cent, the weakest since 2009, the country’s Central Statistical Office said. This is far lower than the 8.4 per cent of 2010-11. Manufacturing and farming are the main areas of weakness. The former is expected to grown by 3.9 per cent against 7.6 per cent in 2010-11. Farm output may gain only 2.5 per cent.
India’s currency, the rupee, was Asia’s worst performer last year against the dollar. The Reserve Bank of India (RBI) is partly to blame because in order to contain inflation, the effects of Europe’s crisis and the domestic impasse on foreign investments, it increased interest rates. Only if the government curbs its budget deficit has it said that it would lower it.
The net result has been that the gap in fiscal receipts and spending reached 92.3 per cent of the fiscal-year target in the nine months through December. Standard Chartered Plc predicts India to miss its goal of lowering the shortfall to 4.6 percent of GDP next month.
The next budget will be presented on 16 March, which should show whether the Reserve Bank’s suggestions have been heeded or not.
If the numbers allow for it, “growth drivers will remain subdued,” which “suggests the RBI will cut rates in April,” said Radhika Rao, an economist at Forecast Pte in Singapore. “The reversal of RBI policy is on the way but will be guided by the fiscal deficit and the drop in inflation.”
“What India needs is a furthering of reforms to expand the capacity of the economy,” said Amol Agrawal, a Mumbai-based economist at STCI Primary Dealer Ltd. “Corruption charges and the reversal of policy initiatives have taken a toll.”
In recent proposals, the government of Prime Minister Manmohan Singh appears ready to follow suggestions made by the Reserve Bank of India. However, nothing has come of them yet, whether it is to allow foreign retailers into the country (the bill was voted down by parliament) or the implement an anti-corruption law, narrowly defeated but crucial to restore the government’s credibility.
These defeats are a bad omen for the ruling Congress party, which has failed to get through bills crucial for its political future.
Now the government has until the end of March to cope with market pressures. If it gets the next budget through parliament, it can hope for a good score in this year’s polls. If not, it could see its hold onto power weakened as it pays a political prices for heeding the central bank’s warnings.
India’s currency, the rupee, was Asia’s worst performer last year against the dollar. The Reserve Bank of India (RBI) is partly to blame because in order to contain inflation, the effects of Europe’s crisis and the domestic impasse on foreign investments, it increased interest rates. Only if the government curbs its budget deficit has it said that it would lower it.
The net result has been that the gap in fiscal receipts and spending reached 92.3 per cent of the fiscal-year target in the nine months through December. Standard Chartered Plc predicts India to miss its goal of lowering the shortfall to 4.6 percent of GDP next month.
The next budget will be presented on 16 March, which should show whether the Reserve Bank’s suggestions have been heeded or not.
If the numbers allow for it, “growth drivers will remain subdued,” which “suggests the RBI will cut rates in April,” said Radhika Rao, an economist at Forecast Pte in Singapore. “The reversal of RBI policy is on the way but will be guided by the fiscal deficit and the drop in inflation.”
“What India needs is a furthering of reforms to expand the capacity of the economy,” said Amol Agrawal, a Mumbai-based economist at STCI Primary Dealer Ltd. “Corruption charges and the reversal of policy initiatives have taken a toll.”
In recent proposals, the government of Prime Minister Manmohan Singh appears ready to follow suggestions made by the Reserve Bank of India. However, nothing has come of them yet, whether it is to allow foreign retailers into the country (the bill was voted down by parliament) or the implement an anti-corruption law, narrowly defeated but crucial to restore the government’s credibility.
These defeats are a bad omen for the ruling Congress party, which has failed to get through bills crucial for its political future.
Now the government has until the end of March to cope with market pressures. If it gets the next budget through parliament, it can hope for a good score in this year’s polls. If not, it could see its hold onto power weakened as it pays a political prices for heeding the central bank’s warnings.
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