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India’s policy tightening still has far to go

India’s economic upswing will probably stay strong over the medium term but we suspect that Q2 GDP, published on Tuesday, will be little changed in y/y terms compared to January-March. Household expenditure and business spending are well-placed to take the lead as the boost fades from government spending, exports, and inventory re-building. But the changeover is likely to bring choppy data for a while. We continue to forecast that GDP in FY10-11 (April-March) will climb 9.0-9.5%, a view which is above the consensus forecast.

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