India GDP Data Better Than Expected for This Quarter

IndusView, Friday August 31 (London): New economic growth figures have been announced today in India showing the economy grew 5.5% in the quarter, driven by a rebound in construction and financial services, and slightly better than the 5.3% posted in the three-month period ending in March.

Other Asian economies, meanwhile, are posting lower growth rates this year. China, for instance, is projected to grow by slower 8.2% this year from 9.2% last year. Indonesia is expected to decelerate to 6.1% this year from 6.5% in 2011, while Malaysia is forecast to slow down to 4.2% from 5.1%. The forecast for South Korea is 3%, down from last year’s 3.6%.

“The GDP numbers were better than expected, which does alleviate some pressure from the Reserve Bank of India to cut interest rates at its next month’s meeting,” said Bundeep Singh Rangar, Chairman of London-based advisory firm IndusView. “Still, reviving growth is a top priority as global economic conditions remain weak and multinationals are wary of India due to policy flip flops in recent months.”

There is still a strong need for a stable policy, taxation and investment regime to attract foreign capital. The 2012-13 Budget introduced a controversial retrospective tax provision in the wake of Supreme Court judgment quashing the tax demand on Essar-Vodafone deal.

On January 2012, India's Department of Industrial Policy and Promotion, Ministry of Commerce and Industry (DIPP) revised its position on single brand retail trading. Multi-brand retailers are still prohibited from foreign direct investment into the market, even in partnership.

Amid uncertainty over global economy, Foreign Direct Investment (FDI) in India registered a growth of 34 per cent to $46.8 billion in 2011-12 against $34.8 billion in the previous fiscal. Inflation based on Wholesale Price Index (WPI) declined to 6.87% in July from 7.25% in June. It is still, however, above the RBI's 5%-6% target.

The central Reserve Bank of India has also warned the country's economic prospects are unlikely to improve in the near-term, due to high inflation, the lack of reform and the impact of poor monsoon rains on farm output.