1
I ndian Economy Update
FY09 GDP com es in at 7.1% ; FY10 estim ate at 5.5%
Trends in GDP (%YoY)
5.3
1.3
5.1
5.9
7.3 7.3
7.8
4.8
6.5
6
4.4
5.8
3.8
8.5
7.5
9.59.7
9
7.1
5.5
6.6
02468
10
12
FY91
FY93
FY95
FY97
FY99
FY01
FY03
FY05
FY07
FY09E
FY11E
High growth phases
\ue000 FY09 GDP slightly higher than expectations \u2014 The government\u2019s advanced GDP estimates for FY09
peg growth at 7.1%,higher than ours and consensus estimates of 6.8%.Growth was led by agriculture up 2.6%, industry (including construction) at 4.8%, while services surprised on the upside coming at a robust 9.6%. Looking at GDP by demand, in line with expectations investment growth slowed to single digits for the first time in six years. Consumption growth remained buoyant at 8.2% with the deceleration in the private sector at 6.8% being offset by the pay revision which gets accounted under public consumption up 16.8%.
\ue000 Will these estimates be revised? Yes but not by much \u2014 Given that 1HFY09 GDP was 7.8%, the full-
year FY09 GDP number indicates that growth during Oct08-March09 was 6.4%. This does appear a bit optimistic given that industrial production, exports, tax collections have seen a sharp deceleration and in some cases a contraction. (The CSO releases four sets of GDP data each year- Advance, Updated Advance, Quick and Revised estimates. The Advance estimates are released in February \u2013 two months before close of the year for the current FY. These estimates will be revised in June and finally next year.)
\ue000FY10 GDP estimate of 5.5%; tailwinds to help in FY11 \u2014 Despite a higher-than-expected number in
FY09, analysts maintain the FY10 GDP estimate of 5.5%. This factors a contraction in exports, a further deceleration in investment growth and a moderation in consumption. While much has been debated on the impact of the global headwinds on growth, its worth keeping in mind the growing impact of the tailwinds in play. These include the coordinated response to the crisis including monetary and fiscal stimulus as well as a collapse in commodity prices. Both these factors should help enable FY11 growth rising to 6.6%
2
Key Highlights
Trends in GDP by Activity (% YoY)
Trends in GDP by Activity (%YoY)
Weights* FY06
FY07
FY08 FY09 FY10E
FY11E
Agriculture
17.8
5.8
4.0
4.9
2.6
3.0
3.0
Industry
26.5
10.2
11.0
8.1
4.8
3.6
5.8
Manufacturing
15.2
9.1
11.8
8.2
4.1
3.5
5.0
Mining & quarrying
2.0
4.9
8.8
3.3
4.7
3.0
5.0
Elect. Gas, water supply
2.0
5.1
5.3
5.3
4.3
4.0
5.0
Construction
7.2
16.2
11.8
10.1
6.5
4.0
8.0
Services
55.7
10.6
11.2
10.9
9.6
7.0
8.0
Trade, Transport, Comm
28.0
12.1
12.8
12.4
10.3
7.5
9.0
Financing & Insurance
14.6
11.4
13.8
11.7
8.6
7.0
8.0
Comm & Social Services
13.1
7.0
5.7
6.8
9.3
6.0
6.0
GDP
100.0
9.5
9.7
9.0
7.1
5.5
6.6
\ue000FY09 Highlights: The 7.1% growth was led by agri up 2.6%, industry up 4.8% and services up 9.6%.
This data could see a small revision given that trends in industrial growth, exports, and taxes have
weakened considerably since Oct08.
\ue000The 9.6% growth in services growth was primarily due to (1) communications where a proxy is the
continued buoyancy in mobile telephony and (2) community and social services \u2013 largely due to
government expenditure (elections + pay commission).
\ue000 FY10 Outlook: We expect growth in industry and services to slow further to 3.6% and 7% respectively.
Agri is the wild card where a bumper crop could result in overall growth coming in over 6%.
Trends in GDP by Expenditure (% )
FY06 FY07 FY08 FY09 FY10E FY11E
Total Consumption (% GDP)
69.8
67.4
66.9
67.6
68.0
68.0
% YoY
6.7
5.9
8.3
8.2
6.0
6.5
Private Consumption (% GDP)
59.5
57.5
57.2
57.0
57.1
57.0
% YoY
6.8
6.0
8.5
6.8
5.6
6.5
Public Cons (% GDP)
10.3
9.9
9.8
1.6
10.9
10.9
% YoY
6.2
5.5
7.4
16.8
8.3
6.5
Gross Cap Formn (% GDP)
33.3
34.0
35.9
37.1
36.5
36.1
Fixed Cap Formn (% GDP)
29.2
30.5
31.6
32.1
31.8
31.9
% YoY
17.6
14.5
12.9
8.9
4.3
7.0
Net Exports (% to GDP)
-2.8
-3.5
-4.3
-6.5
-6.4
-5.3
Real GDP
9.5
9.7
9.0
7.1
5.5
6.6
\ue000 FY09 Highlights: Overall consumption growth held up due to the public sector (elections + pay
revision), while investment growth slowed due to higher rates and slackening demand.
\ue000 FY10 Consumption: While public sector growth will likely hold, higher interest rates coupled with
increasing job losses/wage freezes across sectors are adversely impacting consumption \u2013 particularly
discretionary spending.
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indian economy update-feb 2009
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| Upload Date: | 08/13/2009 |
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