COMMENTARY:
D.K. JOSHI, PRINCIPAL ECONOMIST, CRISIL, MUMBAI:
"I think it is no surprise. Strong base was expected to pull it down. I think capital goods and consumer non-durables were weak. I expect the capital goods growth to weaken in the next fiscal.
"The numbers are unlikely to have any major influence on the RBI's stance. I think inflation is high, and they have been pretty measured. That stance will continue."
RUPA REGE NITSURE, CHIEF ECONOMIST, BANK OF BARODA, MUMBAI:
"Figure is on the lower side only due to the statistical base effect. Sequentially this implies good growth over November and signals no concern at all.
"Growth is now getting normalised and consolidated. Going forward the Reserve Bank of India will have to monitor closely the impact of rising cost pressures and interest rates on growth before taking any aggressive monetary policy actions."
MARKET REACTION:
- The partially convertible rupee trimmed its fall to be at 45.73 per dollar from 45.75 before the data.
- The main share index trimmed losses to be down just 0.1%. It had been down around 0.5% beforehand.
- The most-traded 8.13% 2022 bond yield edged up 1 basis point to 8.20% after the data.
- The one-year swap rate and the five-year swap were both unmoved at 7.46% and 8.08% respectively post data.
BACKGROUND:
- India's domestically driven economy grew 8.9% for the first two quarters of 2010/11 ending March on higher consumption.
- Annual economic growth in 2010/11 is expected to be 8.6%, according to official estimates released by the government this week.
- The HSBC Markit Purchasing Managers' Index , an indicator of manufacturing expansion, nudged up to 56.8 in January from 56.7 in December, the 22nd straight month it has the has been above 50 that divides growth from contraction.
- There are no fears of a contraction in India's industrial output growth as the manufacturing sector is doing well, Trade Minister Anand Sharma said on Tuesday and added anti-government unrest in Egypt would not impact exports.
- The prime minister said last week that high inflation was a serious threat to India's growth momentum.
- The central bank raised key lending and borrowing rates seven times since last March to stem inflationary expectations.
