India probably grew 4.9% in third quarter, says poll

Industrial output shrank during the period

India probably grew 4.9% in third quarter, says  poll

India's economic growth likely slowed to a near decade-low at the end of last year as high interest rates hit factory activity, according to economists polled by Reuters who don't expect a pickup in investment before May elections.

The poll of 36 economists, conducted February 19-25, predicted Asia's third-largest economy grew 4.9 per cent over a year ago in the three months to December, similar to the 4.8 per cent rate in the previous quarter.

That is a shadow of the close-to-double-digit growth rates in recent years and is a signal of the problems gripping Indian factories, which are weighed down by high interest rates and declining consumer demand.

Industrial output contracted during October-December 2013, led by steep fall in capital and consumer goods production.

“High borrowing costs necessitated by elevated inflation, coupled with subdued demand, have kept manufacturing and investment interest on the back foot,"  Radhika Rao, economist at DBS Bank said.

A stalled investment cycle due to uncertainty over government policy has pushed many infra projects onto the back burner in recent years.

That situation is unlikely to improve soon and all 22 economists who answered an extra question said they didn't expect any substantial improvement in investment before general elections in May.

The poll also showed economists were split down the middle on whether Union Finance Minister P Chidambaram's estimate of containing the fiscal deficit at 4.6 per cent of the gross domestic product was achievable, given the prevailing economic conditions.

While 11 out of 22 economists said that Chidambaram's estimate is ‘about right’, an equal number said he was being optimistic. The concern, though, is on the roll-over of subsidies.

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