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Is India’s recovery already over?

India does not appear to have much wind in its sails at the start of 2014 if the recent bout of disappointing economic data is anything to go by, which is raising doubts over a sustained recovery in Asia's third-largest economy.

Industrial production unexpectedly contracted for the second consecutive month in November, falling 2.1 percent on-year, reflecting recessionary conditions in the country's industrial sector. Meanwhile, export growth – a bright spot in recent months – decelerated to a mere 3.5 percent on year in December, down from a recent high of 13 percent in August.

Robert Prior-Wandesforde director of Asian economics research at Credit Suisse says while it's tempting to be bearish about growth expectations for the December quarter and beyond, he's not prepared to throw in the towel yet.

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"Agricultural output growth almost certainly bounced back strongly in the final three months of the calendar year. Meanwhile, services growth should also benefit from a favorable base effect and improved financial market conditions," Prior-Wandesforde, who forecasts growth of 5.2 percent in the final quarter of 2013, wrote in a note on Monday.

India's economy began a feeble recovery in the July-September period, expanding 4.8 percent – a touch faster than the 4.7 percent growth in the previous three months. The gross domestic product (GDP) data for December quarter is due on February 28.

New Delhi, IndiaPatrick Horton | Lonely Planet Images | Getty Images

Sonal Varma, chief India economist at Nomura says recent data are exaggerating the growth slump, citing the industrial production reading that was distorted by a loss in working days owing to the festival season.

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"The slowdown in the industrial sector is coming to an end. But we expect a prolonged bottoming out process as there are no visible triggers for an up-cycle at this stage," said Varma, who forecasts 4.6 percent growth for the December quarter.

Varma expects growth will remain steady in a 4.5-5 percent range for the foreseeable future as stronger rural and external demand offsets impending cuts in fiscal spending as the government attempts to meet its ambitious fiscal deficit target of 4.8 percent of GDP.

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