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Economy Nov 30, 2012

India GDP seen stuck at 3-yr low in July-Sep. Is this the bottom?

By Firstbiz Editors

India's GDP growth in July-September probably hit a three-year low, various poll estimates are showing, even as economists are optimistic about a recovery henceforth.

The government will release the data by noon today.

According to an AFP report, a poll of 18 economists by Dow Jones Newswires sees he GDP at 5.2 percent, same as a median estimate of 26 respondents in a Bloomberg News poll .

Meanwhile, a Reuters poll of 39 economists forecast the growth at 5.4 percent.

In April-June, the growth was 5.5 percent and in January-March 5.3 percent. Reuters

In April-June, the growth was 5.5 percent and in January-March 5.3 percent.

Whatever the actual figure, the key question that the industry and markets is raising is whether this is a bottom.

"We believe that this will be the bottom of the growth cycle and going forward there would be a very, very small pace of recovery," Rupa Rege Nitsure, chief economist at the Bank of Baroda, has been quoted as saying in the Reuters report.

Looking at the overall political and economic scenario too, this optimism is unlikely to be a misplaced one.

Goldman Sachs on Thursday raised rating on India to "overweight" from "market-weight", citing growth recovery and inflation moderation ahead, said.

"Reform initiatives and changes in government leadership this fall have created a sense of optimism among the domestic investor base for the first time in over a year, and the risk of policy missteps in 2013 has been lowered," said Goldman Sachs in a report.

It has a Nifty target of 6,600 points for December 2013.

Bowing to the pressure from the Opposition, the government on Thursday agreed to a vote on the key policy decision to allow foreign direct investment in multi-brand retail. The move is "a major step towards ending a deadlock that has paralysed parliament for days", Reuters said in a report.

The RBI has been piling up pressure by saying its much-needed rate cut move will come only after the government takes fiscal measures to narrow the widening fiscal and trade deficits, which has made the rupee worst performer globally as it fell about 4 percent against the dollar in the last month.

"India needs to revive investment, but that will happen only when inflation and the fiscal deficit come down and reforms accelerate," said Sonal Varma, an economist at Nomura Holdings, has been quoted as saying in the Bloomberg report.

"Without all that, growth and the rupee may remain under pressure," she said.

by Firstbiz Editors

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