ANZ downgrades 2014 growth forecast for India from 5.9% to 4.0%

SINGAPORE – ANZ Bank says it is less optimistic now about prospects for a cyclical recovery as soon as next year, and has substantially cut its calendar 2014 GDP forecast for India to 4.0% from 5.9% prior. “We are also lowering our calendar 2013 annual GDP growth forecast to 4.7% from 4.9%,” ANZ says. India’s annualised H1 growth was 5.1%, but H2 headwinds suggest full year growth will likely be around 4.7%, the bank says.

“We are most concerned about the outlook for investment, which normally accounts for around one-third of India’s GDP. Investment is already sluggish, given policy uncertainty and bureaucratic obstacles. There is now a Cabinet committee to fast-track approvals, but it is too soon to see an increase in investment activity and also risks directing government attention away from delivering reforms needed to attract investment longer-term.

“Consumption growth has been slowing through H1 and a good monsoon should keep consumption relatively stable. However, momentum in vehicle sales remains below trend. Although industrial output ticked up in July, we think this was a reflection of improving external demand helped by a much weaker exchange rate rather than a response to domestic sales.” www.live.anz.com (ATI).