Q1FY13 GDP growth came in at 5.5% YoY (our expectation: 5.6%, consensus: 5.2%), a mild improvement over Q4FY12. Agriculture grew around the trend at ~3%, manufacturing was lackluster at ~0.2% as expected while construction expanded sharply at ~11%, partly due to seasonal factors. Importantly, the services sector is losing momentum, slowing to 6.9% from 7.9% previously, with a marked deceleration observed in trade services, suggesting that the consumption is decelerating materially.
With the impact of poor monsoon yet to reflect in agri-GDP and services slowing much sharper than expected, we are downgrading our FY13 GDP growth estimate to 5.8% from 6.4% earlier. However, slowing consumption is a welcome trend from a medium-term perspective as it will work towards lowering inflationary pressures, creating room for monetary easing and re-balancing the economy in favour of investments.
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