Slowing Q4 momentum in India brings full-year growth to 10-year low

NEW DELHI – India’s Q4 GDP growth slowed in line with expectations to 4.7% y/y as industrial output shrunk and agriculture growth disappointed, outweighing a pick-up in the services sector. The outturn brings India’s full-year GDP growth for 2013 to 4.7% y/y, its lowest since 2003, and down from 5.1% in 2012.

High inflation, rising interest rates and policy reform delays have undermined consumption and private investment, and public capital expenditure has been curtailed to keep a check on a rising fiscal deficit.

Nevertheless, BBVA Bank believes the economy will gradually pick up from here, and that, in particular, inflation has been moderating, the current account deficit has narrowed and the rupee has stabilised, all of which makes it more likely that the RBI’s tightening cycle has ended. BBVA expects rates to stay unchanged at 8.0% at the RBI’s next policy meeting on April 1).

“We expect growth in 2014 to rise to 5.1% y/y, based on an acceleration in H2 as investment reforms take effect and greater clarity emerges after national elections in May. Continued progress on these fronts would allow GDP growth to rise toward 7% in the next few years,” BBVA says. www.bbvaresearch.com (ATI)..