India's Economic Growth Seen Languishing Near 3-Year Low


India's economy probablyexpanded near its slowest pace in three years in the quarter toSeptember, according to a Reuters poll, suggesting little signsof an early turnaround, despite reform steps taken by thegovernment to lure back investors.

Gross domestic product rose 5.4 percent year-on-year in theJuly-September period, slightly lower than the 5.5 percentincrease in the previous quarter, and only just above thethree-year low of 5.3 percent in the quarter to end-March, themedian consensus of 39 consensus showed.

Forecasts ranged from 5.0 percent to 6.2 percent.

Asia's third-largest economy is growing faster than manyother countries, but the pace is way below the 9 percent growththat the government has targeted to provide jobs for a boomingyoung population.

Data on factory activity showed slowing global demand hurtexports and falling investments weighed on the manufacturingsector, which has been the biggest drag on overall growth in thequarter to September.

"There have been no signs of an upturn in India," saidAndrew Kenningham, chief economist at Capital Economics.

"Available data on industrial production and the PMIs pointto little change in growth, while exports have been even weakerin the quarter to September. Overall, therefore, a small furtherdecline in growth rate is most likely."

The government has launched a slew of initiatives to boostgrowth, including raising subsidised diesel prices and openingsectors like supermarkets to foreign players.

However, it has since struggled to enforce the reforms andfailed to break a deadlock in parliament over opening up theretail sector.

"The relaxation of restrictions on inward investment willhave no impact this year, and probably minimal impact in 2013,"said Kenningham.

The central bank has so far rebuffed calls for interest ratecuts, saying prices are still rising too fast to risk looseningpolicy much, and it also wants the government to bring down aworryingly high fiscal deficit.

The next monetary policy review is due in December.