India’s Q1 GDP At 4.4%

India’s GDP for the first quarter of the current fiscal has come at 4.4%, well below the street’s expectations of 4.8%. At this figure, the data is even below what the government had foreseen.

During the quarter, ‘financing, insurance, real estate and business services’ have reported a growth rate of 8.9%, while ‘community, social and personal services’ have clocked 9.4% growth rate. Growth of ‘electricity, gas & water supply’ was at 3.7%. The manufacturing growth rate was -1.2% and that of mining sector was at -2.8%. Most important of all is that except for ‘community, social & personal services’, no industry has shown a growth over last year’s comparable numbers, which means that all industries are in the grip of a slowdown.

The Gross Fixed Capital Formation during this quarter has declined by 1%, while Government Final Consumption expenditure has increased by 10%. Exports have declined by 1% over the last year’s numbers and imports have remained flat.

This is a big blow for the markets, and the Q2 GDP would be even worse in the backdrop of the macro scenario. The full year GDP growth may remain around 4%-4.5% if there is no significant improvement in economic activity.

The once high flying economy has now lost the faith of investors and businesspersons. The numbers indicate a serious need for the government to improve the business sentiment in the country and really act on the promises that it is making. Besides, it also indicates that the series of interest rate hikes effected earlier by the RBI have actually taken a toll on the economy.

Considering these numbers, the markets would ignore all the forward looking statements made by the government, strategists and economists and would correct heavily in the next week. After the gloom of August, the month of September seems set to hold out more doom for the markets.