India’s government predicted the weakest economic expansion this year since 2009, adding pressure on the central bank to reduce interest rates.
GDP will probably rise 6.9 percent in the 12 months through March from a year earlier, the Indian Central Statistical Office said in a statement in New Delhi yesterday. The median of 15 estimates in a Bloomberg News survey was 7 percent. Asia’s third-largest economy expanded 8.4 percent from 2010 to last year.
Growth has slowed after the Reserve Bank of India (RBI) raised rates by a record amount from 2010 until October last year to fight price increases and as Europe’s debt crisis adds to the government’s struggle to spur foreign investment. The central bank has signaled readiness to follow nations from Brazil to Indonesia in lowering borrowing costs, provided inflation eases further from a two-year low of 7.47 percent in December.
“This number reaffirms the belief that growth drivers will remain subdued and suggests the RBI will cut rates in April,” said Radhika Rao, an economist at Forecast Pte in Singapore.
Asia-Pacific officials are striving to weather the impact of Europe’s debt turmoil on global growth. Expansion has eased in countries from China to South Korea, prompting central banks to cut rates or leave them unchanged.
Indian manufacturing may rise 3.9 percent in the current fiscal year, compared with 7.6 percent in 2010-2011, yesterday’s report showed. Farm output may gain 2.5 percent and mining could fall 2.2 percent, according to the estimates.
India’s inflation in December remained the fastest in the so-called BRIC group that also includes Brazil, Russia and China.
The reserve bank on Jan. 24 cut the amount of deposits lenders need to set aside as reserves for the first time since 2009. It also said inflationary threats made it “premature” to start reducing rates.
The government is struggling to curb India’s budget deficit as a slowing economy hurts tax receipts and subsidies spur spending. The gap reached 92.3 percent of the fiscal-year target in the nine months through December. Standard Chartered PLC has predicted that India would miss its goal of lowering the shortfall to 4.6 percent of GDP by March.