Reactions to India's Q2 GDP growth of 7.9%

30 Nov 2009, REUTERS Report

NEW DELHI: India's economy grew by 7.9 percent in the quarter through September from a year earlier, shattering forecasts as stimulus measures boosted demand and manufacturing activity surged.

Here are reactions to the GDP figures:

ATSI SHETH, CHIEF ECONOMIST, MACRO-SUTRA "Our sense is that this was a quarter where we had three excellent factors; abundant liquidity, global recovery and domestic demand was stimulated. So while the headline number has surprised on the upside, it hasn't yet blown all future expectations out of the water." "We think this will be the highest growth rate this fiscal year as agriculture will be a drag in the third quarter, which was the harvest season. We expect a negative number for agriculture in the third quarter.

"On the fiscal side, we think they will remove some measures introduced in 2008 next fiscal year, while the RBI is already poised to raise rates in January. We do not think this number will bring forward or delay the central bank's decision as the situation is yet not clear about the extent of post-festival moderation though it is clear growth momentum is strong enough not to be collapse on account of a rate hike."

RUPA REGE NITSURE, CHIEF ECONOMIST, BANK OF BARODA, MUMBAI: "Numbers are a big surprise, but I still feel there is a concern for sustainability. In the third quarter the agriculture growth is bound to be negative and if the rabi (winter) crop is also a problem, then the overall GDP growth is also bound to suffer."

"We are expecting growth at 6.5 percent with upward bias for the year as a whole. As long as credit doesn't pick up sizeably, the Reserve Bank of India is unlikely to hike rates."

A. PRASANNA, ECONOMIST, ICICI SECURITIES PRIMARY DEALERSHIP, MUMBAI: I think most people had underestimated the services sector growth number. However, we need to watch the farm sector number. This is just the first estimate of the kharif (summer) crop and more estimates will come later. Also, another mitigating factor is government spending. One should look at GDP number setting aside the farm sector.

The non-farm sector, industry and services, are on a strong footing. But I don't think one should overreact as at the beginning of recovery there can be one or two quarters with such surprises." "I continue to maintain that RBI may hike rates by 50 basis points in January and CRR (Cash Reserve Ratio) by 50 bps. Inflation is not out of hand, and I don't expect RBI to do something outside before the January monetary policy."

RAJEEV MALIK, ECONOMIST, MACQUARIE CAPITAL, SINGAPORE: "The strength is mainly from agriculture. Industry performance is broadly in line. While the number is much better than expectations, I suspect the agriculture number will show a decline when revised numbers are announced."

"The December quarter will show agriculture declining, because that's when the harvest shortfall will get captured, but industry is where bulk of the juice is and there was no new information there because monthly industrial data had been doing well in any case." "Overall a very positive report but exaggerated by the performance of agriculture."

"I don't think they (RBI) are going to be swung by what agriculture has done on a technical basis." "We still think RBI would begin liquidity management rather than rate hikes in December-January."