World Economy

Economists Say India Growth Set to End Five-Quarter Slide

Industrial and manufacturing activity  has also improved in recent months.Industrial and manufacturing activity  has also improved in recent months.

Indian economic growth likely rebounded in the July-September quarter from the slowest growth in three years, with demand picking up modestly as the effects from a shock ban on high-value currency notes eased, a Reuters poll showed.

If that’s correct, the data will be the latest evidence of a broad-based global economic upturn across Asia and most of the world that has many major central banks poised to move away from ultra-easy monetary policy.

India was the world’s fastest-growing major economy in 2016. But already-slowing growth was made weaker by the surprise cash clampdown late in 2016 by Prime Minister Narendra Modi’s government, which has hurt consumer spending ever since.

In July, the government introduced a Goods and Services Tax that made sweeping changes to the way businesses across Asia’s third largest economy charge taxes, delivering another blow to the economy.

But the Reuters poll of 52 economists over the past week showed gross domestic product growth likely rose to 6.4% from a year ago in the July-September quarter, from 5.7% in the previous period.

If the data, due to be released Thursday, matches expectations, it will break a five-quarter slowing trend and mark the best rate this calendar year. Forecasts in the poll ranged from 5.9% to 6.8%.

“India’s GDP growth is expected to rebound, albeit at a slower pace, due to supply disruptions stemming from the GST,” wrote Shashank Mendiratta, economist at ANZ, who is forecasting a 6.2% pace.

Industrial and manufacturing activity as measured by business surveys has also improved in recent months. And Mumbai’s BSE Sensex index of leading shares hit a record high earlier this month.

Indeed, none of the 52 economists in the poll expected growth to slow from 5.7%. But for now, few economists expect a return to growth rates above 8% clocked at the start of 2016.

Annual consumer inflation hit a seven-month high of 3.6% in October. Oil prices and those of other commodities have risen in recent months.

Hugo Erken, senior economist at Rabobank, who accurately predicted the surprise slowdown to 5.7% in the previous quarter, said that marked the trough in growth.

“The stimulus package from the government has not had any effect yet on economic activity in India. It will take some time,” said Erken, who remains the most pessimistic forecaster, looking for 5.9% for July-September. But he expects a growth surge to above 8% in the current quarter.

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