India’s slowest economic expansion since 2009 adds pressure on Prime Minister Manmohan Singh to stem a slide in the rupee that forced the central bank to raise interest rates.
Gross domestic product rose 4.4 percent in the three months through June from a year earlier, compared with 4.8 percent in the prior quarter, the Statistics Ministry said in New Delhi. The median of 44 estimates in a Bloomberg News survey was for a 4.7 percent gain.
The rupee has slumped 16 percent versus the dollar this year as India’s record current-account deficit made it vulnerable to an outflow of capital from emerging markets, spurred by the prospect of reduced U.S. monetary stimulus. The Reserve Bank of India raised rates in July to support the currency and contain inflation, imperiling economic expansion even as Singh pledges to revive investment.
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Indian Prime Minister Manmohan Singh (AP-Yonhap News) |
“The government is going to struggle to turn around the economy until it gets the deficit, consumer-price inflation and the exchange rate under control,” said Prasanna Ananthasubramanian, an economist at ICICI Securities Primary Dealership Ltd. in Mumbai. “This may take some time, and growth is at risk in the meantime.”
The rupee, which reached a record low of 68.845 per dollar on Aug. 28, climbed 1.4 percent to 65.705 at the close in Mumbai. The RBI three days ago said it will supply dollars to the largest oil importers to cool foreign-exchange demand. The S&P BSE Sensex index rose 1.2 percent. The yield on the 7.16 percent bond due May 2023 fell to 8.60 from 8.77 percent on Aug. 29.
Nations from Indonesia to Brazil are trying to bolster their currencies as foreign investors exit on concern the Federal Reserve will taper $85 billion a month of debt purchases that boosted the capital circulating in the global economy.
The RBI is set to sustain and may even extend recent monetary tightening, according to BNP Paribas SA. (Bloomberg)
