Q3FY12 - SLOWDOWN IS CLEARLY EVIDENT
By Ruma Dubey
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| Q3 | Q2 | Q1 | YoY |
| GDP | 6.1% | 6.9% | 7.7% | 8.3% |
| INDUSTRY GROWTH | 2.6% | 3.2% | 5.1% | 7.6% |
| MANUFACTURING | 0.4% | 2.7% | 7.2% | 2.7% |
| SERVICE | 8.9% | 9.3% | 10% | 7.7% |
| FARM | 2.7% | 3.2% | 3.9% | 11% |
| MINING | -3.1% | -2.9% | 1.8% | 6.1% |
| CONSTRUCTION | 7.2% | 4.3% | 1.2% | 8.7% |
| TRADE, TRANSPORT | 9.2% | 9.9% | 12.8% | 9.8% |
| FINANCIAL SERVICES | 9% | 10.5% | 9.1% | 11.2% |
| ELECTRICITY, GAS | 9% | 9.8% | 7.9% | 3.8% |
The Prime Minister's Economic Advisory Council had recently pegged the growth estimate for current fiscal at 7.1% per cent, which is higher than the 6.9% advance estimate put out by the Central Statistics Office. But given the trend of falling GDP in the current fiscal, even 6.9%, at this juncture seems like a tall order. In all likelihood, we are staring at a GDP of around 6.5 to 6.8%.
The real shocker was manufacturing which was just about managed to hold on to the positive, with a just 0.4% growth. The farm sector growth was disappointing despite a record Kharif crop; probably the other sectors like horticulture, animal husbandry and the rest pulled down the overall agri growth. Services sector, as expected was good but given the slump in manufacturing, one wonders how long can service sector also hold on to this growth rate. Going forward we are sure to see a contraction in Q4 and it could come in around 7 to 7.5%.
Investment deceleration is worrying. It is down sharper than what was anticipated. The gross fixed capital formation saw a fall of 1.2% on a YoY and down 4.1% on a QoQ. Slowdown in investments and manufacturing is today even sharper than the 2008 meltdown. Composition of growth is worrying, high fiscal deific is boosting consumption but crowding out investment, and unless we see revival in investments, we cannot expect growth to go ahead much from here. Unless action happens from the Govt side, we do not see too much light at the end of this tunnel.
Private final consumption expenditure has grown 6.2% on a YoY and 2.9% on a sequential basis. This seems more like an aberration given the fall of 4.1% in capital formation. There is a huge gap between consumption and capital formation and this is the perfect recipe for inflation. For sustainable growth, this growth pattern is not healthy and needs to get corrected.
The govt needs to introspect, read these figures carefully and give thought – it needs to get into action or else, the Indian economy could fall into the abyss. The Govt needs to take steps to stimulate growth and if the Govt continues to announce only pro-poor policies to catch the vote bank, it might miss out on the bigger picture. Incidentally, the pro-poor policies are not too working too well, infact the gap between the haves and the have not’s has only widened. Govt needs to focus on supply side issues.
6.1% is most likely the trough. We are stuck in this growth rate of below 7% for the next few quarters, maybe till H1FY13.
Rate cuts? That might not happen till end of Q1FY13 or early Q2FY13. Oil is currently at US$ 120+ and thus 50 bps CRR and cut in SLR is all that we can expect from the RBI on 15th March.
The market is not spooked by these facts and figures. And that is probably because of the inbuilt sense of optimism. The market is hopefully seeing a much better future than what the macro factors indicate today.