GDP - Slowdown hits services:: Edelweiss, PDF link

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Q4 GDP growth slipped sharply to 5.3% YoY against expectations of 6.2%. While sharp upward revision in the Mar 2011 GDP contributed to this decline, a major role was played by steep fall in services growth. Specifically, the trade component of services fell dramatically, implying that consumption is coming under stress. On trend basis (QoQ, SA, 4QMA), the economic activity continued to slow during the quarter. Clearly, slowdown is spreading from industry to services. With this, our FY13 growth expectation of 7% looks stretched; hence, we will be downgrading it. Regarding monetary policy, while INR weakness remains a concern, RBI ought to develop more comfort on core inflation as economic activity has slipped far below potential. Accordingly, there are high chances of a rate cut in the June policy meet.

GDP - Slowdown hits services

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