By Ruma Dubey

Even while Q4FY16 numbers from India Inc continued to send shock waves, with more companies showing a loss and degrowth than profits and growth, these GDP numbers for Q4FY16 have been a true chart buster. Banks are in losses, rural consumption is poor and IIP too has been bad. Yet, this robust GDP number comes in, making one once again question the sanctity of the numbers – are the IIP and other numbers wrong or is this new GDP method wrong?

The Govt, in February had estimated that GDP for FY16 will come in at 7.6%. And almost everyone had expected the Govt to more than 100% meet its estimates; and it did! Q4FY16 GDP was a blockbuster at 7.9% v/s 7.3% in Q3 and FY16 GDP came in at 7.5%.  With the Govt achieving what it said, it brings in a sense of reassurance that growth momentum is intact while bringing in back some faith into the new GDP numbers, which have been getting a lot of brick bats for the past few months. Most have complained that the new method of calculating the GDP presents a more robust picture of the economy than what is reality on the ground level.

Growth was led by agriculture sector growth at 2.3% v/s (-)1.7% (YoY) and Manufacturing at 9.3% v/s 6.3% though lower than 11.3% in Q3. The Govt had estimated manufacturing to come in at 9.5% for Q4, so this small blip is hardly a fall. This again leads one to question – how come these manufacturing numbers are so robust when IIP numbers came in so weak – for FY16, as per IIP there was just a 2% growth and in fact for March, it showed a degrowth of 3.2%? Economists have explained that this difference between GDP and IIP is on account of the way it is calculated – IIP calculates volume growth while GDP takes into account the value addition in the sector and makes all the difference.

Regarding agriculture, despite the drought situation in the country, the rise in farm growth was expected based on the third advance estimates of the food grain production released by the agriculture ministry. The data which came in early May stated that total foodgrain production in FY16 was estimated at 252.23 million tonnes, marginally higher than 252.02 million tonnes produced in FY15. The ministry has estimated wheat crop output to rise 8.7% and pulses were expected to remain stable while rice, cotton, oilseeds, coarse seeds were estimated to show a lower production. Most in the sector expected the Ministry to show a downward revision when the fourth advance estimates are released, either in July or August. But for now, the estimates are optimistic.

Private Final Consumption Expenditure (PFCE) at current prices is estimated at Rs.80.76 lakh crore in 2015-16 as against Rs.71.93 lakh crore in 2014-15. At constant (2011-12) prices, the PFCE is estimated at Rs.63.01 lakh crore in 2015-16 as against Rs.58.64 lakh crore in 2014-15.

Gross Fixed Capital Formation (GFCF) at current prices is estimated at Rs.39.72 lakh crore in 2015-16 as against Rs.38.44 lakh crore in 2014-15. At constant (2011-12) prices, the GFCF is estimated at Rs.35.41 lakh crore in 2015-16 as against Rs.34.08 lakh crore in 2014-15.

The market is certain to greet this bumper Q4FY16 GDP with great fervor but once again eyes will be on RBI on 7^th June and then all activity will hover around the FOMC meet on 15^th June.

Everytime, the GPD or IIP number comes, the immediate question is whether RBI will reduce rates. One cannot help but wonder why the media thinks that RBI alone, with its rate cut can help spike up growth? That is not RBI’s job! Rate cuts happening in June seems unlikely but over the next few days, the media frenzy will again build up and raise illogical hopes of a rate cut. The RBI Governor is now well known for not giving into tokenism to make the markets happy so a mere 25 bps cut, even if it happens, will not really help and a 50 bps rate cut? We are simply not yet ready for that.

Everything for now depends on the monsoon. Yes, despite such technological advancements and science making progress, we still need the Rain Gods! There is no invention yet made to make water. If there is a normal monsoon, we can be assured that the growth will pick up. So instead of tuning into the next GDP, IIP or inflation numbers, it is best to keep an eye on the sky and hope that rains do not play truant this year.

Next week, rains should hit Kerala and by 10^th June, it should come to Mumbai.  Let’s see ….