Macroeconomic Forecast India

Household spending, the mainstay of the Indian economy, is starting to feel the pinch of 300 basis points (bps) of monetary tightening since February 2010. Growth in passenger car sales fell into single-digit year-on-year territory (at 7.0%) in May for the first time since June 2009, a trend in line with the expectations of BMI 's autos team. With banks likely to curb back lending for big-ticket items in the near term, we expect weakness in private consumption to persist. For FY2011/12 (April-March) as a whole, we see private consumption growth falling to 5.5% from an estimated 8.0% in the previous fiscal year.

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