Will India's 1Q GDP report a disappointing "5"?

The numbers continue to fall: Moody's Analytics predicted a 5.9% growth, a slowdown from last year's 6.1% and 2010's 8.5%.

The corporate sector has reported the biggest slowdown, dragged by higher interest rates, a challenging export environment, and policy mismanagement and political stasis. Moreover, industrial production has been weak and first quarter exports fell sharply. Will capital imports be strong enough to pull the GDP up?

Here's more from Moody's Analytics:

India will release its first quarter GDP figures Thursday and they could be ugly. The economy slowed from 8.5% y/y across 2010 to 6.1% y/y in the fourth quarter of 2011 and likely cooled further in early 2012. Financial markets, which provide a more timely gauge of economic activity, have weakened through the first half of the year, with the Sensex and the rupee trending down since mid-February.

The slowdown has been broad, but most pronounced in India's corporate sector. Confidence and demand have been weighed down by higher interest rates, a challenging export environment, and, perhaps most important, policy mismanagement and political stasis at home. Industrial production has been weak, and first quarter exports slowed sharply.

The current account deficit remains a concern, and net exports will detract from first quarter growth. Yet the big wild card could be business investment. It's always difficult to get a fix on private capital expenditure, but there are signs that the first quarter figure could be negative, and substantially so.

The industrial production breakdown shows a sharp fall in capital goods production, although capital imports appear to be holding up. This fixed investment figure will largely determine whether we get a terrible or only slightly disappointing headline.

Government investment is still powering ahead, and India's consumer sector is ticking over and remains a solid source of growth. Production of consumer durables has slowed, but not collapsed, and consumer demand is growing close to trend, though it won't be enough to prevent a first quarter slowdown. We estimate GDP grew 5.9% y/y in the period.

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