India GDP & Monetary Policy – June 2015
The Indian economy expanded by 7.5% over the year to March 2015. Services, followed by Industry, were the best perfromers however agriculture contracted raising concerns about urban-rural divide. Industrial production activity is expected to gain momemtum in the second half of the year and NAB Economics is forecasting a 7.8% expansion in 2015, followed by 8% in 2016.
Summary & Overview
- The Indian economy expanded by 7.5% over the year to March 2015.
- Services (9.2%) was the best performing, particularly Hospitality and Financial services.
- Industry (5.4%) was the next best performing, but Agriculture (-1.4%) contracted, raising concerns about an urban-rural divide.
- Partial indicators don’t reflect this optimism, although industrial production activity is expected gain momentum in the second half of the year.
- NAB Economics is forecasting a 7.8% expansion in 2015, followed by 8% in 2016.
- The RBI cut the Repo rate by 25bp to 7.25% in its June 2 meeting.
- The RBI has since announced more aggressive measures that banks can employ to recover doubtful assets.
- Indian equity markets have remained weak, with debt-burdened companies among the worst impacted.
- NAB Economics is forecasting the Repo rate to remain on hold at 7.25% by the end of the year.
- A further rate cut would depend on favourable commodity (food & fuel) price developments.
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