Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
India January-March 2011 GDP: A lower print confirms weakening
activity
India January-March real GDP growth came in at 7.8% yoy, below the revised 8.3% yoy (from 8.2% yoy)
growth in the October-December quarter. Today’s print was weaker than Bloomberg consensus expectations of
8.1% yoy and largely in line with our estimate of 7.9% yoy. Sequentially, January-March is a strong quarter due to
the financial year ending, and GDP grew 9.8% qoq; seasonally-adjusted; annualized after the 0.6% contraction in
the previous quarter.
Meaningful decline in industry growth, services moderated too. In the last quarter of FY11, as predicted by the
industrial production (IP) data, industry grew at a weak 5.3% yoy, driving the slower GDP print. Services sector
growth moderated to 8.6% yoy, mainly due to the weaker performance of construction and financing, insurance,
real estate and business services. However, agricultural growth remained strong at 7.5% yoy.
On the expenditure front, fixed investment growth witnessed a sharp fall to 0.4% yoy from 7.8% yoy in the
previous quarter. Private consumption growth also fell to 8.0% yoy from 8.6% yoy in the October-December
quarter. However, government expenditure rose 5% yoy from 1.9% yoy. Exports continued to maintain the growth
momentum with a 25% yoy rise.
For FY11 as a whole, GDP grew 8.5% yoy, higher than the 8.0% yoy rise in FY10. Both private consumption
and fixed investment grew 8.6% yoy in FY11, However, government spending growth fell sharply to 4.8% yoy from
16.4% yoy in FY10, indicating the gradual removal of fiscal stimulus. Both exports and imports showed a marked
recovery and grew 17.9% yoy and 9.2% yoy respectively from negative growth in FY10.
The GDP data suggests that activity likely peaked in the first half of FY11, and has been on a downtrend
since. With higher rates, increasing oil prices, and the impact on capex, we continue to expect GDP growth to slow
further in FY12. Our FY12 estimate for GDP growth remains at 7.5%, below consensus expectations of 8%.
Even though activity is slowing, we think that inflationary pressures will keep the Reserve Bank of India
(RBI) in a tightening mode, and we continue to expect a 25-bp rate hike on June 16. With this print, we rule
out the possibility of a 50-bp rate hike in the next policy meeting. We continue to believe that the RBI will hike by
another 75 bp from here, and that the recent increase in market expectations of the quantum of rate hikes being
greater than 75 bp, will need to come down.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
India January-March 2011 GDP: A lower print confirms weakening
activity
India January-March real GDP growth came in at 7.8% yoy, below the revised 8.3% yoy (from 8.2% yoy)
growth in the October-December quarter. Today’s print was weaker than Bloomberg consensus expectations of
8.1% yoy and largely in line with our estimate of 7.9% yoy. Sequentially, January-March is a strong quarter due to
the financial year ending, and GDP grew 9.8% qoq; seasonally-adjusted; annualized after the 0.6% contraction in
the previous quarter.
Meaningful decline in industry growth, services moderated too. In the last quarter of FY11, as predicted by the
industrial production (IP) data, industry grew at a weak 5.3% yoy, driving the slower GDP print. Services sector
growth moderated to 8.6% yoy, mainly due to the weaker performance of construction and financing, insurance,
real estate and business services. However, agricultural growth remained strong at 7.5% yoy.
On the expenditure front, fixed investment growth witnessed a sharp fall to 0.4% yoy from 7.8% yoy in the
previous quarter. Private consumption growth also fell to 8.0% yoy from 8.6% yoy in the October-December
quarter. However, government expenditure rose 5% yoy from 1.9% yoy. Exports continued to maintain the growth
momentum with a 25% yoy rise.
For FY11 as a whole, GDP grew 8.5% yoy, higher than the 8.0% yoy rise in FY10. Both private consumption
and fixed investment grew 8.6% yoy in FY11, However, government spending growth fell sharply to 4.8% yoy from
16.4% yoy in FY10, indicating the gradual removal of fiscal stimulus. Both exports and imports showed a marked
recovery and grew 17.9% yoy and 9.2% yoy respectively from negative growth in FY10.
The GDP data suggests that activity likely peaked in the first half of FY11, and has been on a downtrend
since. With higher rates, increasing oil prices, and the impact on capex, we continue to expect GDP growth to slow
further in FY12. Our FY12 estimate for GDP growth remains at 7.5%, below consensus expectations of 8%.
Even though activity is slowing, we think that inflationary pressures will keep the Reserve Bank of India
(RBI) in a tightening mode, and we continue to expect a 25-bp rate hike on June 16. With this print, we rule
out the possibility of a 50-bp rate hike in the next policy meeting. We continue to believe that the RBI will hike by
another 75 bp from here, and that the recent increase in market expectations of the quantum of rate hikes being
greater than 75 bp, will need to come down.
No comments:
Post a Comment