Q2 GDP growth slowest in 9 quarters
DSIJ Intelligence / 30 Nov 2011
India’s Q2 GDP growth at 6.9 per cent (7.7 per cent in Q1) is the slowest pace recorded in the last 9 quarters. In comparison, GDP grew at 8.4 per cent in the corresponding quarter last year. In H1FY12, GDP has grown at a rate of 7.3 per cent vs 8.6 per H1FY11.
The dismal and sluggish performance has been on account of negative performance by the mining and quarrying sector coupled with a slowdown in manufacturing and agriculture sector. The mining sector is facing a slowdown as a result of a ban on iron ore mining leading to an overall fall in output.
However the electricity sector followed by communications and BFSI sector managed to pull in some growth and restrict any further contraction in the overall GDP numbers.
As far as the markets are concerned, it seems to they have already discounted this development in previous trading sessions and as such the slowdown has failed to create any further panic. In fact Sensex has bounced back into the green post the GDP announcement and is currently trading up by 0.27 per cent at 16041.97.
| Particulars | Quarterly GDP at Factor Cost (2004-05 prices) | Half Yearly GDP at Factor Cost (2004-05 prices) | |||
| Q2FY12 | Q1FY12 | Q2FY11 | H1FY12 | H1FY11 | |
| Agriculture, Forestry and Fishing | 3.2 | 3.9 | 5.4 | 3.6 | 3.7 |
| Mining | -2.9 | 1.8 | 8 | -0.5 | 7.7 |
| Manufacturing | 2.7 | 7.2 | 7.8 | 4.9 | 9.1 |
| Electricity, gas and water supply | 9.8 | 7.9 | 2.8 | 8.9 | 4.1 |
| Construction | 4.3 | 1.2 | 6.7 | 2.7 | 7.2 |
| Trade, hotels, transport and communication | 9.9 | 12.8 | 10.2 | 11.3 | 11.1 |
| BFSI and real estate | 10.5 | 9.1 | 10 | 9.8 | 9.9 |
| Community, social and personal services | 6.6 | 5.6 | 7.9 | 6.1 | 8 |
| GDP at Factor Cost | 6.9 | 7.7 | 8.4 | 7.3 | 8.6 |
The above tables confirm that the fall in Q2 GDP numbers, coupled with dismal IIP numbers of July, August and September are indicative of an evident slowdown in economic activity and leads one to believe that tough times lie ahead of us.
Now all eyes are on the RBI and its monetary policy stance to be announced on 16th December 2011. An obvious slowdown in economic activity plus cooling inflation numbers, could force the central bank to take a pause from its rate hike campaign, that has seen 13 hikes since March 2010. One must also closely watch the inflation internals for this week as the numbers may provide more cues into RBI’s possible policy action.
In conclusion, we at DSIJ advice our readers to stay cautious and closely follow the central bank's policy stance. The markets are currently under sever pressure from high interest rates, inflation, a possible mute set of Q3 numbers, the depreciating rupee and net FII outflows.
If all that isn't enough, a crumbling and an unstable Euro zone has added fuel to fire and done enough to keep global sentiments on a bearish note. Under such circumstances, there is very little room for markets to provide any cheer to the investors. The best would be to stay away for a while and wait for this tide to subside.
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