Schroders Botham India could grow 5pc

Schroders is expecting a modest pickup in Indian growth, reaching 5% this year.

Schroders Botham India could grow 5pc

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Craig Botham, emerging markets economist, said while Indian growth slowed slightly in Q4 by 0.1% in line with expectations, the deceleration was led by manufacturing which contracted 1.9% on the year after expanding 1% the previous quarter and construction, which grew just 0.6% after growing 4.3% in Q3.

“This weakness more than offset service sector strength,” Botham added.

He said overall, GDP growth for 2013 came in at 4.7% and this year looked only marginally brighter.

While on the positive side, exports responded well to the weaker rupee, which he said had stabilised, while imports had contracted on restrictions and demand suppression.

“We should see continued strong performance from exports as developed markets recover this year Meanwhile, Governor Rajan is seeing the first signs of success in his campaign against inflation, but the tighter monetary policy seems likely to have a negative impact on economic growth.”

Botham added that growth last year was also helped by a stronger harvest induced by better weather conditions, and said there was a risk of the El Niño weather pattern having the opposite effect this year.

“Finally, the banking system remains strained, and India’s high corporate leverage combined with poor provisioning could see slow credit growth acting as a drag on GDP. Overall we expect a modest pick-up in growth, to 5.0%, this year,” he concluded.

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