Friday, June 1, 2012

>GDP growth slips to 5.3% in Q4FY2012

India’s gross domestic product (GDP) for Q4FY2012 came in at Rs1,395,071 crore, registering a year-on year (Y-o-Y) growth of 5.3%, which was significantly below the market’s expectation. This was contributed by a negative growth in the manufacturing segment,
and a slower growth in the agriculture and services segments. For FY2012 the GDP growth was at 6.5% as against 8.4% in FY2011.

All the three segments of the GDP, agriculture (up 1.7% vs 2.8% in Q3FY2012), industry (up 1.9% vs 2.5% in Q3FY2012) and services (up 7.9% vs 8.9% in Q3FY2012) have reported a slower growth for the quarter on a sequential basis.

From an expenditure perspective, consumption grew 
by 5.8% year on year (YoY) led by a 6.1% Y-o-Y growth in private consumption and a 4.1% growth in government consumption. The gross fixed capital formation grew by 3.6% YoY in Q4FY2012 as compared to a decline of 0.3% Y-o-Y in Q3FY2012.

The GDP growth of 5.3% was the lowest since the beginning of the new series (2004-05) and reflects the impact of the RBI’s monetary tightening and policy paralysis. The FY2012 growth of 6.5% was below expectations and growth estimates for FY2013 continue to get revised downwards (to 6.5% from 7.5% earlier). This calls for coordinated actions from the government
and the RBI to revive growth. Given the extremely weak IIP numbers and below expected GDP growth, the probability of RBI taking action on CRR or repo rates (reduction by 25bps) in July (if not immediately on June 18 mid quarter monetary policy review) has increased substantially.