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India’s Period of Weaker Economic Growth Nears Its Low Point

Dec 3, 2012 4:43 AM   By Dilipp S Nag
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RAPAPORT... The economic slowdown in India is nearing its lowest point, but it could  worsen slightly  before an improvement is observed in the fourth quarter of the country's fiscal year, which ends March 31, 2013, according to an ASSOCHAM business confidence survey.

The survey, titled “Business Confidence of India Inc.," concluded that business confidence would certainly improve if India's Parliament ended a longstanding political impasse and growth resumed for  the country's core  infrastructure industries.

About 76 percent of the chief executives and chief financial officers surveyed said that the economy still faces fundamental  problems --high interest rates, high inflation and a double dip recession in several key European economies-- and these issues  have a bearing on emerging economies, including India.  Those surveyed predicted that India's gross domestic product (GDP) for the current financial year would grow between 5 percent and 5.5 percent, or down a solid percentage point from the previous year.  

“We may be heading for a decade low of growth, but the turnaround is visible in the next six to seven months," said Rajkumar Dhoot, ASSOCHAM’s president. He noted that the end of an impasse in Parliament over foreign direct investment (FDI) for multi-brand  retail, has exposed the maturity of India's political system for which it debates the most contentious issues and then chooses the path best suited for the country.

ASSOCHAM said that it is in agreement with Goldman Sachs and the Moody's, both of which believed economic conditions in India have just about bottomed out.  "Although Europe continues to battle its economic woes, the situation in the U.S. is not too much of a worry despite the concerns over so-called fiscal cliff," the survey pointed out. It said even the exports would show a turnaround from end of the third quarter and from January.

The survey stated that India’s exports have become more diverse and the trade within Asia, which is not too affected by the West, has been increasing. Some of the economies within Asia, such as China, Japan, South Korea and southeastern Asia,  have emerged as big consumers of India's goods, thus providing a cushion to the deceleration of trade to the West,  the survey noted.

After showing a nine-year low growth of 6.5 percent in the fiscal year that ended in March 2012, India's economy grew by 5.5 percent in the first quarter and 5.3 percent in the second quarter of fiscal 2013. Due to a longer lead time in product production,  manufacturing remains a big concern to those surveyed as output data would lag in growth before the segment strengthens, the survey noted.

However, professional services and the agriculture sectors have managed well throughout this slower period  and are expected to remain strong, helping the country maintain respectable levels of economic expansion, ASSOCHAM concluded.
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Tags: asia, ASSOCHAM, Dilipp S Nag, Economy, gdp, India, Slowdown, US
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