Forex - India REVIEW: Q2 FY2020 GDP Growth Worsened to a Low since FY2013


 03:04 (GMT) 02 Dec

  [Economic Data]

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India REVIEW: Q2 FY2020 GDP Growth Worsened to a Low since FY2013 (0101-PWWX-C01)

India's Q2 FY2020 GDP growth plummeted further to 4.5% y/y, a low since FY2013. Although, it was aligned with market expectations, this was a slip from 5.0% y/y in Q1 FY 2020.

Private consumption growth ticked slightly higher to 5.1% y/y in Q2 FY2020, however, remained subdued. Investment growth dipped to 1.0% y/y, compared to 4.0% y/y in the previous quarter. Exports contracted for the first time since FY2016, by 0.4% y/y. Meanwhile, growth was supported by a surge in government expenditure at 15.6% y/y in FY 2020.

Overall, this is a weak print and we expect the Reserve Bank of India (RBI) to ease further in order to lend support to growth. We expect a 25-bps rate cut at the RBI's meeting on December 5, to bring the repo rate to 4.9% at year-end. We continue to see room for demand-side fiscal support announcements such as tax cuts either in the February budget or before. Given a tight fiscal hand, we believe an accelerated divestment plan will likely be in the cards.


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