India's GDP growth rate plunges to 5.3%

However, electricity generation slowed down by 4.6 per cent, from 6.4 per cent in April 2011.

COMMENTARY:

RUPA REGE NITSURE, CHIEF ECONOMIST, BANK OF BARODA, MUMBAI

This is definitely a very important signal for the government - this is a make or break situation for India and the government has to step on the panic button. What we need now is a clear reforms agenda like the one adopted in 1991 with a clear focus. If the government doesn't step in now, India's sovereign ratings may be jeopardized.

The government has to address on a priority basis the subsidies, fiscal consolidation, the kind of delays that have slowed down the industrial investments, liberalization on FDI, etc. The RBI is unlikely to cut rates as inflation is still high. We are having a kind of stagflationary situation so RBI's rate cuts will not help as it will only spur consumption further by individuals with high disposable income, but do little to address the supply-side pressures that are fuelling inflation.

RADHIKA RAO, ECONOMIST, FORECAST PTE, SINGAPORE

Disappointing number though not entirely surprising in light of the persistently under weather manufacturing sector, weak investment sentiments and sluggish external sector. The authorities meanwhile will be in a bind in the face of mounting growth risks, while there is no leeway for fiscal accommodation at this juncture.

Stagflationary concerns could also return to fore as the recent rupee depreciation adds to inflation worries, even as the negative output gap tempers demand conditions. Faced by the twin challenges, RBI treads a fine balance yet again - we see room for 50 bps more cuts in the year, though a possible firm May inflation number could prod the central hold steady in mid-June after the recent aggressive cut in April.

RAHUL BAJORIA, REGIONAL ECONOMIST, BARCLAYS, SINGAPORE

Incrementally, the growth slowdown will probably take up more space in policy making and we expect RBI to continue with modest easing. I think after this data, market may come to a view of closer to 50-75 basis point rate cut in rest of the fiscal year, which is also our view, from 25 basis points factored in now.

... contd.

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