The country’s economy has slowed a little more as private consumption growth eased to 6.3% from 8% in 1Q11.
HSBC says the country’s industrial production growth declined in July, but this was largely because of the volatile nature of the capital goods segment.
Here’s more from HSBC:
Inflation still the key concern
India’s economy slowed a little more in 2Q11, with GDP up 7.7% y-o-y (versus 7.8% y-o-y in
High frequency indicators show that growth is declining, particularly in the manufacturing sector.
Even so, the economy is facing the lagged effects of monetary tightening, the uncertainty associated with high inflation, and the natural speed limit imposed by tight capacity. While the domestic orientation of the economy limits the spill over from adverse global economic conditions, it is not immune, and global weakness has spilled over through the trade and confidence channels. For this reason, we have lowered our 2011 forecast to 7.4% from 7.6% and our 2012 forecast to 8.1% from 8.2%.
Despite slower growth, inflationary pressures are not abating. Excess demand is still pushing up
The 2011/12 central government budget target of 4.6% of GDP may not be achieved due to slower growth and a larger-than-budgeted fuel subsidy bill. Consequently, fiscal policy will at best be neutral, leaving monetary policy with the responsibility of tackling inflation. We expect the policy rate to rise another 25bp over the rest of 2011/12, taking the repo rate to 8.50%.
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