India GDP figures set to deepen gloom

India is set to announce dismal new economic growth figures on Friday, with expansion in the April-June quarter forecast at near nine-year-lows. "The numbers will be bad," Siddhartha Sanyal, chief India economist with Barclays Capital told AFP ahead of the publication of the data, which is expected to deepen the gloom surrounding Asia's third-biggest economy. "Industrial growth is likely to be flat, inflation is high and it is unclear what the government can do in the next three to six months," Sanyal said. He forecasts India's gross domestic product (GDP) grew at the same rate as the previous quarter at 5.3 percent, a high figure by the standards of developed countries but far below the near double-digit growth of much of the past decade. Leif Eskesen, HSBC's chief India economist predicts the same, saying "growth will be muted due to global headwinds and the lack of structural reforms in India." India's once booming industrial sector is in crisis, with output contracting by a shock 1.8 percent in June due to high borrowing costs, declining confidence and falling demand. Overseas investor confidence in the Indian economy is also on the wane, as shown by figures for foreign direct investment (FDI) for the quarter to June which tumbled year-on-year by 67 percent to $4.43 billion, Global rating agencies like Fitch and Standard and Poor's have lowered their outlook on India's investment-grade rating amid rising worries about the government's deteriorating finances and negative current account. The central Reserve Bank of India has also warned the country's economic prospects are unlikely to improve in the near-term, due to high inflation, the lack of reform and the impact of poor monsoon rains on farm output. The RBI has kept interest rates on hold since April -- when it cut rates for the first time in three years by 50 basis points -- and economists do not expect the bank to lower rates in a hurry. While other central banks around the globe have been easing interest rates to revive their troubled economies, the RBI says a cut in government subsidies and revival of investment are needed to remove chronic bottlenecks in the economy. Wholesale inflation stands at 6.87 percent -- above the bank's comfort level of five to six percent -- while the consumer price index, which covers a smaller band of goods, is at 9.86 percent. Business leaders and industry want collective action from the government and the RBI to boost growth. "Immediate policy actions are needed, both by the government and RBI, to arrest the downward spiral in industrial growth," director-general of Confederation of Indian Industry Chandrajit Banerjee said last week. But Jigar Shah, head of research with Kim Eng Securities, warned: "The mood is downbeat and people have no hope left from the government. "The only positive is that things possibly cannot get worse." India's economy is expected to grow 6.7 percent in the current fiscal year, according to a forecast by an advisory panel to the prime minister, while many economists see it as even lower. The government -- damaged by a series of corruption scandals -- is struggling to introduce legislative reforms in parliament due to protests from the opposition which is demanding Prime Minister Manmohan Singh resign. India's national auditor last week criticised Singh's government for giving away coal blacks since 2004 in a murky allocation process rather than selling them via a transparent auction. In figures that have since been hotly contested, the auditor said companies given valuable resources had made windfall profits of 1.85 trillion rupees or $33 billion, a part of which could have gone to the national exchequer.