DISMAL Q4FY14 GDP - A RESIDUE OF THE 'OLD' GOVT
By Ruma Dubey
| Q4FY14 | Q3FY14 | Q2FY14 | Q1FY14 | |
| GDP | 4.6% | 4.6% | 5.2% | 4.7% |
| MANUFACTURING | -1.4% | -1.9% | 1.0% | -1.2% |
| AGRICULTURE | 6.3% | 3.6% | 4.6% | 2.7% |
| MINING | -0.4% | -1.6% | -0.4% | -2.8% |
| CONSTRUCTION | 0.7% | 0.6% | 4.3% | 2.8% |
| TRADE, TRANSPORT | 3.9% | 4.3% | 4.0% | 3.9% |
| FINANCIAL SERVICES | 12.4% | 12.5% | 10% | 8.9% |
| ELECTRICITY & GAS | 7.2% | 5% | 7.7% | 3.7% |
| COMMUNITY, SOCIAL, PEROSNAL SERVICES | 3.3% | 7% | 4.2% | 9.4% |
Sixth consecutive quarter where we have got a less than 5% growth rate and that means that slowdown is now deeply entrenched. This time around when we see all the sectors, most have had a dismal performance and the savior has been the financial sector, like in Q3, which showed a robust 12.4% growth. Yet again, this looks unsustainable given the gap between Construction, which was pathetic at 0.7%. The good news though was on the agriculture front, which showed a growth of 6.3% v/s 3.6% in Q3.
An economy which is propped up by financial sector for one quarter and another which needs agriculture to spur growth, clearly there are risks involved. There is no sustainable growth visible currently on the horizon; what we can only do is make estimates and the hope that one or the other sector helps pull it up. Manufacturing sector is literally limping and with nothing really helping it move ahead, this crippling effect is expected to continue. Throughout FY14, except for Q2, all the three quarters the manufacturing sector has shown a degrowth, which in a nutshell gives us an entire picture about the limping economy.
Regarding agriculture, according to the third advance estimates of crop production released by the Ministry of Agriculture, there is a slight upward revision as compared to their second advance estimates in the production of rice (106.29 million Tonnes from 106.19 million Tonnes), wheat (95.85 million Tonnes from 95.60 million Tonnes) and sugarcane (348.38 million Tonnes from 345.92 million Tonnes) for the year 2013-14. Due to this revision in the production, ‘agriculture, forestry and fishing’ sector in 2013-14 has shown a growth rate of 4.7% as against the growth rate of 4.6% in the Advance Estimates
Thankfully, there is a fall in community, social and personal services. This is once again social spending by the govt and this is something which the economy does not require and cannot afford at this point of time. This spend does not lead to any asset creation and hence not considered to be productive spend.
The market will shrug off this news on Monday morning; it would be actually completely forgotten. The market has already discounted all this bad news, taking it now as a part of the old Govt. It is now looking ahead with hope that the new Govt will change these dismal GDP numbers into much better numbers in the coming months.
But mind you, pay attention to the news on monsoon as that can play a complete spoiler. All this great hope we currently have can get buried under parched earth with less rains as it will have a direct impact on prices and growth.
It is unlikely that the RBI will take any step to reduce rates when the policy is announced on 3rd June. At the moment there is nothing which warrants a rate cut if inflation is the target and if we need to keep a watch on the monsoon, surely all the more reason why rates will not come down in June.
So lets wait and watch the sky and hope the rain Gods do not play truant this time.
The next release of quarterly GDP estimate for the quarter April-June, 2014 (Q1 of 2014-15) will be on 29.08.2014.