MUMBAI (Reuters) - India's economic growth slowed to 5.3 percent in the three months through September from 5.7 percent in the previous quarter, dragged down by weaker manufacturing, government data showed on Friday.
Analysts polled by Reuters had forecast annual growth of 5.1 percent in the quarter.
COMMENTARY
SUJIT KUMAR SINGH, ECONOMIST, UNION BANK OF INDIA
The GDP growth number was supported by agriculture and government expenditure, both of which won't sustain in the next quarters. We need both fiscal and monetary policy action to revive growth. While government reforms will be quicker in terms of expanding capacity utilisation by companies, monetary transmission works with a lag of two quarters. But one cannot run fast with both hands tied to the back. So we need cost of borrowing to come down, for which interest rates have to be cut, as well as risk premium of doing business has also to come down, which will need government reforms.
UPASNA BHARDWAJ, ECONOMIST, ING VYSYA BANK, MUMBAI
One positive surprise was the agriculture number which has propelled GDP, but going ahead I don't think agriculture growth is likely to remain at such high levels. At the same time, the government spending which is reflected in the services component of the GDP numbers has also seen significant growth, but I expect that number to also come down given the tight fiscal situations.
So, in short, both the factors which are supporting growth will not be there to propel in the next quarter which is a worry. However, we were not expecting RBI to change its policy stance next week, and these numbers further affirm that. If it was a very, very low number, there would have been prssure on the governor to act immediately. The better than expected overall GDP growth gives him that cushion until the next policy to take a call on rate cuts.
SONAL VARMA, ECONOMIST AT NOMURA INDIA, MUMBAI
GDP growth is largely in line with our expectations (5.4 percent). In terms of the sectoral trends, agriculture growth is quite robust (3.2 percent) considering the weak monsoons and suggests rising share of commercial crops in overall agriculture production.
Industrial growth has moderated in Q3 due to weak manufacturing activity, but this was anticipated. Services sector growth has accelerated led by a pick-up in trade/transportation activity and also increased government spending. On the demand side, consumption accelerated, investment demand slumped and net exports dragged down growth, so the composition is not ideal.
However, leading indicators suggest that India's business cycle is already on a gradual recovery path and hence we remain positive on the growth outlook. Expect GDP growth at around 5.5 percent in FY15 and 6.5 percent in FY16. No change to RBI view: On hold on Dec. 2.
RUPA REGE NITSURE, CHIEF ECONOMIST, BANK OF BARODA, MUMBAI
If I go by all leading indicators, they suggest credit demand has almost collapsed and corporates are still in wait and watch mode. So maybe the impact of delayed monsoon will be more severely felt in the third quarter GDP numbers. So in my understanding of the underlying currents, growth appears to be in the neighbourhood of 5.2-5.3 percent (2014/15).
RBI will not give much weightage to this factor because they want to institute a credible inflation fighting regime. They have been saying in clear terms that the growth stimulus has to come from the government. They would like to wait and see the trend in global commodity prices because geopolitical factors cannot be taken for granted. They will not take any action hastily now or in the current fiscal year.
Increasingly, their tone will become more dovish. It is likely RBI may go for sector-specific measures to stimulate credit rather than the broad-brush approach of bringing down interest rates.
SHIVOM CHAKRABARTI, SENIOR ECONOMIST, HDFC BANK, MUMBAI
The GDP growth number is slightly better than we expected because of better-than-expected agriculture growth which we do not expect to sustain in the third and fourth quarters. Overall, the economy has bottomed out and there is a slow and modest recovery. Now the onus is on the government to boost growth by reviving investment climate and get reforms moving like passing the land acquisition bill, goods and service tax, insurance bill. That will have a more pronounced impact on growth in the next fiscal year.
A rate cut will help, but given RBI's aggressive stance to achieve 6 percent inflation by Jan 2016, we expect RBI to cut rates at the earliest in February but the tone of the policy statement on Tuesday will be dovish to build in a case for a rate cut going ahead.
(Reporting by Suvashree Dey Choudhury, Abhishek Vishnoi, Himank Sharma, and Neha Dasgupta; Editing by Sunil Nair and Biju Dwarakanath)
