The country's growth fell slightly to 5.3% in the third
quarter, broadly in line with consensus estimates and from the
second quarter's 5.5%. Quarter-on-quarter growth also slowed to
1% from 1.3%.
"There were both things to laugh and cry about in
todays numbers, but overall the reading was emotionally
neutral," Leif Lybecker Eskesen, chief economist for India and
ASEAN at HSBC, wrote in an analysis piece after the data were
"We are getting close to the bottom, although we are most
likely talking about a 'bathtub shaped' recovery with some
bottom scraping in coming quarters."
Agriculture slowed to 1.2% from 2.9% because of the poor
monsoons, but industrial output staged modest growth of 1.2%,
led by mining and manufacturing.
Services' growth edged down to 7.1% from. 7.4% in the second
quarter, led by construction.
Eskesen noted that net exports "were a major drag on growth,
subtracting 1.3 percentage points from growth" versus -0.2
percentage points in the second quarter.
In September, the government launched a series of daring
reforms such as raising prices for subsidised
diesel and opening the politically-sensitive retail sector to
foreign investors, sparking a rally in markets.
RBI SEEN STANDING PAT
But this was not enough to spur growth over the short term,
and analysts say fundamental elements of the economy are still
"Consumption demand remains weak," said Barclays analyst
Siddhartha Sanyal, noting that private final consumption
expenditure grew 3.7% in the third quarter, averaging around
4.6% in the first nine months of the year, "markedly lower than
the average of about 7.6% during the previous five
Even the strengthening sectors do not paint a rosy
Growth in mining had largely to do with a favourable base
effect and the sector is still held back by issues such as
constraints on coal production, while the manufacturing sector,
although it advanced faster than expected, is still increasing
at "a very moderate pace" because of global headwinds, Eskesen
"Looking ahead, growth may end up moving, more or less,
sideways in the near term. Growth in the current quarter will
not benefit much from either policy progress or global
stabilization," he said.
The Reserve Bank of India (RBI) meets on December 18 and
there has been intense pressure on it to lower the interest
rate to help boost economic growth. However, the bank has so
far stood firm, saying its main worry was keeping inflation at
bay, and analysts say there is little hope it will change its
stance next month.
"The RBI is attempting to strike a balance by holding rates
steady, while ensuring that the pressure on liquidity in the
banking system does not become disruptive," said Sanyal.
"Unless we see meaningful downside surprises to inflation
(headline or internals) in mid-December, we expect the RBI to
maintain its policy stance in its December meeting."