- Report this week is forecast to show economic growth slid to six-year low
- Moody’s cut India credit rating outlook to negative this month
- GDP growth probably slowed to 4.6% last quarter, says Bloomberg survey
The rupee is the only emerging Asian currency to weaken this quarter and its losses may gather pace as a report this week is forecast to show economic growth slid to a six-year low.
The rupee, which has slumped almost 5 per cent from this year’s high in July, is also under selling pressure due to escalating levels of public debt and a credit crunch among non-bank finance companies, known as shadow banks. Moody’s Investors Service cut the country’s credit rating outlook to negative this month, saying the economic slowdown was deeper and longer than it anticipated.
“The biggest risk emerging for India at this juncture is growth weakness,” said Indranil Pan, chief economist at IDFC First Bank Ltd. in Mumbai. “That, along with fiscal risks, will probably cause the rupee to weaken. The poor growth conditions may lead to lower capital flows and hence could be a significant negative for the currency.”
India’s gross domestic product probably slowed to 4.6 per cent last quarter, which would be the least since the first three months of 2013, according to the median estimate in a Bloomberg survey before the data is released Friday. State Bank of India, the country’s largest lender, predicts growth will slide to 4.2 per cent, a record low in data starting in 2012.