India September GDP Growth Slows Down To 5.3%

The market was expecting a GDP growth figure of about 5.4 to 5.5 per cent and hence the actual GDP growth is mostly in line with the market expectation. At 5.3 per cent we expect the yearly GDP growth estimates to largely remain unchanged at 5.5 to 5.6 per cent. The market had sensed lower GDP growth and hence as soon as the GDP numbers were announced both Nifty and BSE Sensex gained from the morning trading levels. One of the reasons might be absence of any negative surprises that helped market’s momentum.

Higher growth was also seen in the financial services sector which grew by 9.4 per cent. The primary highlight of the GDP is that during the quarter the construction sector saw 6.7 per cent growth. The key indicators of the construction sector i.e. cement and consumption of finished steel grew by 5.1 per cent and 2.3 per cent respectively. The agriculture sector, however, saw a growth of only 1.2 per cent which was in line with the market expectation as the poor monsoon in the country during the July to September period took a toll on farming.

The only breather however has come in the form of a ‘stable’ outlook affirmed by Moody’s and an ‘outperform’ rating tagged by Goldman Sachs on the country. Investment bank Nomura now expects a slow recovery next year with a GDP projection of 6.1 per cent. It expects that issues related to inflation, supply side constraints and weak exports will put pressure on the growth curve.
Amidst all these facts, the question whether our economy has bottomed out remains unanswered. The rupee, after showing strength in the last month, has again depreciated to the 54-odd level against the dollar. The fiscal deficit may come in higher due to the surging gold and coal imports. Of the Rs 30,000 crore divestment target, the government has so far achieved Rs 932 crore. The failed telecom auction in that sense should also be seen as a negative factor.

Amid these concerns, one should also pay attention to the host of global trade data which has shown expansion in the factor output in China. The Japanese trade data published today also show 1.8% growth against expected decline of 2.2%. On the back of this there is slight possibility that the GDP growth of the country may have bottomed out.