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India Q1 GDP at 4.4 per cent; industrial growth drops sharply

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India Q1 GDP at 4.4%; industrial growth drops sharply
India's Q1 GDP for the 1st quarter ending June 30, 2013 has come in at a disappointing 4.4 per cent, largely at the lower end of analysts estimate.

Economists and analysts are unlikely to take great heart from today's GDP data, which was largely below estimates of 4.7 per cent. The GDP is now sub 5 per cent for 3 quarters in a row. It was 4.8 per cent for the previous quarter ending March 31, 2013.

 

The GDP growth is unlikely to cheer stock markets on Monday and the rupee which had rallied today could fall again.

 

The agricultural sector was one sector which reported a good growth of 2.7 per cent for Q1 2014 , thanks to good monsoons and improvement in productivity.

The manufacturing growth has come in at a surprisingly low of -1.2 per cent, while the services sector reported a growth of 6.6 per cent. Q1 construction growth was at 2.8 per cent as against 7 per cent in the previous quarters.

The last few quarters the GDP has almost halved from the strong growth recorded in the last few years. In fact, a few quarters ago the GDP reached its lowest level in a decade. India was growing even better at the peak of the Lehmann crisis.

Analysts are worried that the GDP could trend lower as investment has failed to pick up and interest rates are still at an elevated level. The next quarter it is estimated that the GDP could be even worse given the hit over the rupee and the lower services data that we have already received.

Raghuram Rajan who is set to take over as the new Governor of RBI is unlikely to cut interest rates aggressively given the volatility in the currency and elevated levels of inflation.

Most of analysts and foreign broking firms have cut India's GDP forecasts. "With RBI set to sustain, even extend, recent monetary tightening, we now expect the palpable downside risks facing the Indian economy to largely crystallise over the next 6-9 months," said French Bank BNP Paribas earlier this week.

Other noted foreign investment banks only recently downgraded India's GDP forecasts lower. Analysts do not see the GDP recovering anytime soon unless investment demand picks up.

GoodReturns.in

Read more about: gdp q1 gdp economic growth
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