India’s real GDP growth during Q3FY09 came in at 5.3% Y-o-Y, much lower than expectations by economists at 6.3 -6.1%. This is a sharp fall from the previous quarter’s growth of 7.6% and, in fact, the lowest since Q4FY03. April-December FY09 GDP growth, thus, recorded a growth of 6.9% against 9.0% during similar period of the previous year.
The sharp fall in overall GDP was driven almost entirely by the shocking 2.2% Y-o-Y decline in agriculture and allied activities in Q3FY09 (against our estimate of 2.5% growth).
There has been intensification of slowdown, as expected, across most sectors. However, no other sector sprang any major surprise. Manufacturing recorded a Y-o-Y decline of 0.2% in Q3FY09 (the first quarterly decline since Q4FY98) *vis-à-vis* growth of 5.0% in the previous quarter and 8.6% in Q3FY08. The construction sector is continuing with sharp deceleration on expected lines.
The services sector, which contributes over 55% to real GDP, still registered a growth of 9.9% Y-o-Y in Q3FY09. The surge in services sector growth was driven primarily by the sub-sector of ‘community, social and personal services’, which registered a 17.3% Y-o-Y growth in Q3FY09. Such high growth is, however, one-off as this sub-sector benefited significantly in the current quarter due to disbursement of higher salaries and arrears by the government as per recommendations of the Sixth Pay Commission.
Deceleration in ‘trade, hotel, transport, and communication’ was more than expected. We do not expect any further significant softening in this segment in the coming quarters. On the other hand, ‘financing, real estate, and business services’ are likely to face further slowdown.
It is likely that FY09E GDP growth estimate gets revised to ~6.7% from 7.2% projected earlier. After a gap of over 5 years, India would be registering a growth at lower than 7% p.a.
The sharp fall in overall GDP was driven almost entirely by the shocking 2.2% Y-o-Y decline in agriculture and allied activities in Q3FY09 (against our estimate of 2.5% growth).
There has been intensification of slowdown, as expected, across most sectors. However, no other sector sprang any major surprise. Manufacturing recorded a Y-o-Y decline of 0.2% in Q3FY09 (the first quarterly decline since Q4FY98) *vis-à-vis* growth of 5.0% in the previous quarter and 8.6% in Q3FY08. The construction sector is continuing with sharp deceleration on expected lines.
The services sector, which contributes over 55% to real GDP, still registered a growth of 9.9% Y-o-Y in Q3FY09. The surge in services sector growth was driven primarily by the sub-sector of ‘community, social and personal services’, which registered a 17.3% Y-o-Y growth in Q3FY09. Such high growth is, however, one-off as this sub-sector benefited significantly in the current quarter due to disbursement of higher salaries and arrears by the government as per recommendations of the Sixth Pay Commission.
Deceleration in ‘trade, hotel, transport, and communication’ was more than expected. We do not expect any further significant softening in this segment in the coming quarters. On the other hand, ‘financing, real estate, and business services’ are likely to face further slowdown.
It is likely that FY09E GDP growth estimate gets revised to ~6.7% from 7.2% projected earlier. After a gap of over 5 years, India would be registering a growth at lower than 7% p.a.
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