NEW DELHI (Reuters) - India’s economy is likely to have grown at an annual rate of between 7.0 and 7.5 percent in the July-September quarter and that should be roughly the rate of expansion for the current fiscal year as a whole, its chief statistician said.
Pronab Sen, secretary at the ministry of statistics and program implementation, told Reuters gross domestic product (GDP) expansion may ease below the trend rate of about 7.3-7.4 percent in fiscal 2009/10 (April/March).
“We could go sub-trend next year,” Sen said in an interview as part of the Reuters India Investment Summit.
Asia’s third-largest economy has grow at 9 percent or higher in the past three fiscal years.
It grew 7.9 percent in the June quarter from a year earlier, its slowest annual rate in 3- years. September quarter data is due on Friday.
Annual inflation, as measured by wholesale prices, has fallen from a peak of nearly 13 percent in August to 8.9 percent in early November, but Sen said it would not hold in single digits on a sustained basis until January.
“After that it should come down pretty rapidly. By March it should be down to 5 percent or less,” he said.
The central bank projects inflation at 7 percent by the fiscal year end in March, and is aiming to bring it down to 5 percent as soon as possible.
Since the global credit crunch spilled into India’s money markets in September and October, the Reserve Bank of India (RBI) has lowered its key lending rate by 150 basis points to 7.5 percent and slashed banks cash reserve ratio (CRR) by 350 basis points to 5.5 percent.
The CRR is the proportion of deposits banks have to hold the central bank, and Sen said there was scope for it to fall to 3.5 percent.
“Now I recognize that we don’t have that much space left available on the CRR, but we still have 200 basis points,” he said.
Sen said he was less bearish than some observers about the third and fourth quarters of India’s fiscal year because the credit problems had probably started earlier than just September-October, when it locked up the money market.
Trade prospects were also improving marginally with constraints on trade credit starting to relax, and that too would be supportive for growth.
“Some of the slowdown already factors in the credit situation, but they do not factor in the credit relaxation the government has done subsequently,” he said.
Indian exports likely slumped an annual 12 percent in October as demand braked in major markets hit by the credit crisis, provisional data showed, underlining how hard it will be to meet a $200 billion export target for the 2008/09 fiscal year.
Trade Secretary G.K. Pillai said the government might extend interest subsidies and offer other tax breaks to struggling firms.
Several major economies, including Germany and Japan, are already in recession.
Sen said India would not go into recession like a developed economy, but there was a risk it could slow to a growth rate that would lead to increased unemployment.
“When you have an economy where your labor force is growing at 2.5 percent, any growth below 6 percent will lead to increased unemployment,” he said.
Editing by John Mair