'Balance of payments, rupee depreciation and high interest rates to pose a drag'.
The government may believe that economic growth bottomed out in the April to June quarter of this fiscal, but fresh macro economic data pouring in have made a host of private analysts more cautious, who have now scaled down India’s GDP growth forecast to below 4.5 per cent for 2013-14. India’s manufacturing sector contracted for the first time in August this year in more than 50 months, according to an HSBC survey.
The HSBC/Markit purchasing managers index (PMI) for the manufacturing industry stood at 48.5 in August, lower from 50.1 in July, indicating an overall contraction. This is the first sub 50 reading the PMI since March 2009.
“Manufacturing activity contracted in August for the first time since March 2009. This was led by a decline in new orders, especially export orders,” HSBC chief economist for India and ASEAN Leif Eskesen said. HSBC on Monday also trimmed India’s GDP forecast to 4 per cent for the current fiscal and 5.5 per cent for 2015. It had earlier estimated the Indian economy to grow at 5.5 per cent in 2013-14 and at 6.6 per cent next fiscal.
“But, this is not the bottom. High-frequency indicators, such as HSBC’s PMI indices and business sentiment indicators, suggest that the growth momentum eased further during the July-September quarter in both the manufacturing and services sectors,” Eskesen said in a separate note, adding that reform announcements are yet to translate into action. Further, consumers and business have become cautious about spending on the back of heightened macro economic uncertainty.
According to official data released last Friday, the Indian economy grew at an estimated 4.4 per cent in the first quarter of this fiscal though Prime Minister Manmohan Singh said it is likely to see some revival over the next three quarters and growth could touch 5.5 per cent in 2013-14.
HDFC chairman Deepak Parekh said there is good news only on the agriculture front where growth is projected at 4 per cent this fiscal. “Money is going out of India with a negative outlook on FII debt. Internationally, confidence in India has gone down, which is reflected in the rupee,” he said at Motilal Oswal Annual Global Investors Conference.
Global financial services firm Nomura has cut India’s GDP growth projection for the current fiscal to 4.2 per cent from the earlier 5.5 per cent and has kept