Q1FY15 GDP CRACKLES! GANPATI BAPPA MORYA!

By Ruma Dubey

After nine quarters or  two years and a quarter, India’s GDP for current Q1FY15 came in much higher than expected at 5.7%, which is 100 bps higher than 4.7% recorded in previous Q1.

India Inc could not have welcomed Lord Ganesha with a bigger bang! The festive cheer only got better and lights seem to be shining brighter!

It is after some time that we have some heartening news on the economic front and in the midst of this great festivity, it feels good times have indeed come to stay. Realistically speaking, the new Govt or Modiji have not made any contribution but somehow it goes on to keep the optimism alive. 

India Inc’s corporate performance for the current Q1 has not exactly been great with most capital goods companies recording dismal numbers. Yet, the growth in Q1 was led mainly by the manufacturing sector, supported by mining and construction. Agriculture put up a dismal show and electricity literally had an electrifying run – growth at a whopping 10.2% v/s 3.8% (YoY).  Growth of trade and hotels was comparatively somber nevertheless higher than previous Q1 at 2.8%.

The internals of the data show that as per data provided by the Department of Agriculture and Cooperation (DAC), the production of coarse cereals and pulses registered growth rates of 11.2% and 6.2% respectively during the Rabi season of agriculture year 2013-14 (which ended in June 2014) and rice and wheat also registered growth of 15% and 2.6% over the production in the corresponding season of previous agriculture year. Among the commercial crops, the production of oilseeds increased by 3% during the Rabi season of 2013-14.

And in service sector,  the key indicator which is the railways, showed a growth in  the net tonne kilometres and passenger kilometres have shown growth rate of 3.3% and 5 .5% respectively during Q1 of 2014-15. In case of other transport sectors, passengers handled by the civil aviation, cargo handled by the civil aviation and cargo handled at major ports registered growth rates of 7.5% and 6.2% and 4.3% respectively while the sales of commercial vehicles registered the decline of 16.1% during Q1 of 2014-15 over Q1 of 2013-14. The other key indicators, namely, aggregate bank deposits, and bank credits have shown growth rates of 12.4% and 13.3%, respectively as on June 2014 as against growth of 13.5% and 13.5% respectively as on June 2013.

This is great news and we can only hope that the Govt manages to keep the momentum going, puts all the policies into action. Economically, short terms risks are more balanced than before but risk of monsoon remains. The RBI explained in the Credit Policy that a below par monsoon does not necessarily mean lower food production depending on where it rained and lower production does not necessarily mean higher food prices if supply is managed well. Mr.Rajan said that policy tightening is unwarranted for if inflation follows the chalked out growth path.  RBI Governor like rest of us is looking ahead and anticipating things to get better.

IIP data for July 2014 is expected to be announced on 12^th Sept and RBI Policy is on 30^th Sept. Let’s wait and watch how these numbers and policy actions pan out. But for now, it’s a good feeling to have positive numbers and we can only hope that Ganesha has brought with him good tidings for the current fiscal.