India posts better-than-expected Q3 GDP growth

MUMBAI - Third quarter GDP growth in India rose to 4.8% y/y from a four- year low of 4.4% y/y in Q2. The pickup was led by strong agricultural output, as anticipated, on the back of favourable weather conditions and unexpectedly high industrial output, which offset a slowdown in services growth (5.9% y/y vs 6.6% previously). From the expenditure side, headline growth was driven by strong exports.

Meanwhile, the November HSBC manufacturing PMI for India expanded to 51.3 from 49.6 in October, ending five straight months of contraction. BBVA Bank says the GDP and PMI outturns pose upside potential to its 2013 full-year GDP projection of 4.2%, as the Government's efforts to unlock stalled investment projects continue.

“Nevertheless, we remain cautious about the near-term growth outlook given high interest rates, elevated inflation pressures and the fiscal drag from cuts in public spending to achieve the Government's 4.8% fiscal deficit target for FY14 (year ending March), and election uncertainty in 2014,” BBVA says. “We expect a meaningful recovery to emerge only after 1H14 once ongoing investment reforms take effect, and greater clarity emerges on the new Government after the general election result in May. www.bbvaresearch.com (ATI).