Indian economy has been undergoing a serious economic downturn for last one year. It’s GDP in 1QFY13 grew merely 5.5%, marginally higher than 5.3% in the previous quarter. The bad news is that the services sector, which contributes near 60% of India’s GDP, is getting impacted by the severe slowdown in the manufacturing sector.
I expect that India’s GDP growth would moderate to 5.8% in FY13. Despite the marked growth slowdown, upside risks on inflation are unlikely to allow RBI to cut repo rate in CY12.
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| India's services sector facing a tough time |
Growth in services sector decelerated sharply to 6.9% in 1QFY13, - the lowest in over three years. The resilient services sector had been the key driver of India’s GDP until now. The services sector recorded a median growth of 10% in the past 29 quarters.
I expect that India’s GDP growth would moderate to 5.8% in FY13. Despite the marked growth slowdown, upside risks on inflation are unlikely to allow RBI to cut repo rate in CY12.
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