The latest figures announced, the GDP growth rate of India for the fourth quarter of 2011 is 6.1%, against 6.3% forecast. While India’s growth, over a year, showed signs of slowing, the underlying data are not as bad as what the overall figures suggest, particularly with growth of household consumption to 6.2 % against 2.9% in Q3. The Indian authorities have already begun easing monetary constraints put in place to fight against inflation, and as we said earlier, they would probably drastically reduce, albeit reluctantly, the interest rate during the years.
We believe that these figures will push the politicians and the central bank to act quickly to stimulate the economy and accelerate the implementation of reforms. Meanwhile, the markets, we believe that the impact of these figures (mainly the consequences of a fall in investment) is largely reflected in valuations and analysts’ estimates on GDP growth during the fiscal year 2013 remain around 7%. If monetary policy continues to relax, we could see a spike in investment during the second half of the year. Moreover, the key factors of Indian growth such as urbanization or the increasing consumption remain intact. We believe our portfolio is well positioned to benefit from these trends with a large exhibition of consumer goods and financials, which should benefit from lower interest rates.