FY12 Advance GDP Growth Dips To 6.9 Per Cent

Shattered and battered under the weight of high inflation, rising interest rates and slowdown in export demand, Indian advance GDP growth for FY12 has dipped to 6.9 per cent as against 8.4 per cent in FY11. This number is slightly below street estimates of 7.1 per cent.

As per the initial numbers, manufacturing growth has fallen sharply to 3.9 per cent versus 7.6 per cent (yoy). Consequently Industrial growth also dipped to 3.9 from 7.2 per cent last year. Slowdown in construction activity has led to construction growth moderating at 4.8 per cent as compared 8 per cent a year earlier. Farm output has also been impacted and it stands at 2.5 per cent as against 7 per cent in the previous year. Mining output has seen one of its worst performances and has dived into the negative zone at -2.2 per cent from 5 per cent a year earlier. Services sector saw marginal improvement to stand at 9.4 per cent as against 9.3 per cent a year earlier.

Markets have reacted negatively to this development. After reaching an intra-day high of 17832.04, the SENSEX has fallen back to 17745.69 post-announcement of the advance GDP numbers. Though the markets have given away part of their gains, in our view, we do not foresee any further negative reaction as much of the slowdown in GDP number were expected and priced in.

The latest set of advance GDP numbers stand below RBI’s estimated GDP for FY12 at 7 per cent and Govt. estimates of 7.25 per cent. Going forward, we expect some improvement in the GDP numbers owing to a pick up in Industrial activity and manufacturing during the second half of FY12. Having said this we still expect GDP to come less than 7.25 per cent.