Q1FY13 GDP growth at 5.5%; beats estimates

Driven by higher-than-expected performance on the agriculture front, Indian economy grew 5.5 per cent in first quarter this fiscal, higher than 5.3 per cent GDP number recorded in the previous quarter of fiscal 2012. The growth figure, which is better than consensus estimates of 5.2 per cent, is sharply lower from the robust 8 per cent growth in the same quarter of the last financial year.

As per official data released by the Central Statistics Organization (CSO), quarterly GDP at factor cost at constant (2004-2005) prices for Q1 of 2012-13 is estimated to be at Rs 1306,276 crore, as against Rs 12,38,738 crore in Q1 of 2011-12. Meanwhile, GDP at factor cost at current prices in Q1 of 2012-13, is estimated at Rs 2178778 crore, as against Rs 19,19,286 crore in Q1, 2011-12, showing an increase of 13.5 per cent.

Agriculture emerged as the only saving grace for the sagging economy, which has witnessed a near-stalling of industrial activity. Agriculture came in at better than expected at 2.9 per cent, as against major economists’ estimates at 2 percent. According to the government’s press release, the economic activities which registered significant growth in April-June of 2012-13 on year on year basis are construction at 10.9 percent, financing, insurance, real estate and business services at 10.8 percent and community, social and personal services at 7.9 percent.

On the flip side, services sector was the biggest disappointment, which grew at 6.9 per cent against 10.2 per cent in the year ago period. While, manufacturing saw tepid growth of 0.2 per cent for the quarter under review as against a contraction of 0.3 per cent in the previous quarter. Additionally, mining sector of the economy grew at 0.1 per cent versus 4.3 per cent quarter-on-quarter.

Meanwhile, the gross fixed capital formation (GFCF), a measure of investments, at current and constant (2004-05) prices during 2012-13 are estimated at 29.9 per cent and 32.8 per cent, respectively, as against the corresponding rates of 31.2 per cent and 33.9 per cent, respectively in Q1 of 2011-12. In terms of GDP at market prices, the rates of Private Final Consumption Expenditure (PFCE) at current and constant (2004-05) prices during Q1 of 2012-13 are estimated at 11.7 per cent and 11.1 per cent, respectively, as against the corresponding rate of 11.0 per cent and 10.6 per cent, respectively in Q1 of 2011-12.

However, this slight improvement in GDP growth for the June quarter may prompt the Reserve Bank of India to stand still at its upcoming monetary policy review meet on September 17, as the central bank has reiterated that the government’s fiscal policy action should precede any rate cut move. Further, the central bank also previously stated that investments, the fuel needed to put the economy back in the 8% trajectory, may not revive for more than a year even with lower interest rates, in light of adverse consumption and savings behaviour of individuals and companies.