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HSBC lowers India's growth forecast to 6.2%

Last updated on: June 15, 2012 18:14 IST

HSBC lowers India's growth forecast to 6.2%

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HSBC on Friday lowered India's economic growth forecast for this fiscal to 6.2 per cent, from 7.5 per cent earlier, saying slower progress in 'supply-side reforms' and 'protracted global recovery' have dented growth prospects.

"In light of the weaker starting point for the year, the slower progress on supply-side reforms than previously expected and the more protracted global economic recovery, we scale back our growth forecast notably," HSBC Economist Leif Eskesen said in a report.

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HSBC lowers India's growth forecast to 6.2%

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"Administrative hurdles and domestic policy paralysis will continue to hold back investments and limit the scope for a near-term improvement in growth momentum," HSBC said.

For financial year 2013, HSBC expects growth of just 6.2 per cent (as against 7.5 per cent previously) and for fiscal year 2014 it believes India's growth rate will recover to around 7.4 per cent (lower than 8.2 per cent previously).

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HSBC lowers India's growth forecast to 6.2%

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HSBC's downward revision is in line with similar kind of revisions by a host of other think-tanks, research houses, investment banks and other agencies like the UN, Morgan Stanley, Goldman Sachs, Merrill Lynch, Stanchart and Citi.
Rating agency Standard & Poor's has warned that India would lose its investment-grade if urgent reform measures are not taken.

Most of these revisions were after the release of government data last month which pointed to dismal growth.

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HSBC lowers India's growth forecast to 6.2%

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Indian economy had expanded by 8.4 per cent in FY10 and FY11 before plunging to 6.5 per cent in the last fiscal.

India's annual and sequential growth will remain 'quite moderate' in coming quarters, HSBC said, adding that only some scope for a gradual recovery in the growth numbers is likely during the second half of this fiscal.

According to HSBC, RBI may 'feel compelled' to pull the trigger and cut rates again on Monday, most likely by 25 basis points, despite sticky and elevated inflation.

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HSBC lowers India's growth forecast to 6.2%

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Indian economy had expanded by 8.4 per cent in FY10 and FY11 before plunging to 6.5 per cent in the last fiscal.

India's annual and sequential growth will remain 'quite moderate' in coming quarters, HSBC said, adding that only some scope for a gradual recovery in the growth numbers is likely during the second half of this fiscal.

According to HSBC, RBI may 'feel compelled' to pull the trigger and cut rates again on Monday, most likely by 25 basis points, despite sticky and elevated inflation.

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HSBC lowers India's growth forecast to 6.2%

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However, HSBC warned that the rate cut would be the wrong medicine to cure the growth ails.

"Instead, a heavy dose of structural reform is needed," HSBC said, adding that "teasing up demand would only risk generating more inflation".


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