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India : Economic growth slows
- 1. India : Economic Growth (GDP) July-Sept 2014 INDIA-in- FOCUS FINALYTIKS
- 2. Economic growth slows Indian economy grew @5.3% in Jul-Sept 2014 quarter (YoY), lower than the 10-quarter high of 5.7% recorded in the previous quarter, but better than 4.7% in FY14 (Apr'13-Mar'14) Slow down due to lower Industrial (@ 2.2%) and Agricultural (@ 3.2%) growth during the quarter. But services sector grew @ 7.1% Private spending grew at 5.8%; Fixed Capital formation was flat; Government expenditure expanded @ 10.1% Economy is expected to grow @ 5.5% in FY15 and 6.5% in FY16 (Apr-Mar) New government's policy decisions key to growth revival; Central bank is expected to cut policy rates by early 2015 GDP Growth at Factor cost 12% 10% 8% 6% 4% 2% Source : CSO; Compiled by : Finalytiks 5.7% 4.6% 5.3% 0% Q1FY10 Q2FY10 Q3FY10 Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 GDP at Factor Cost Q1 FY15 Q2 FY15 5.7% q 5.3%
- 3. RBI Professional Forecasters’ Survey of Economic Growth Second quarter : Actual Vs Forecasts The actual growth rates for Q2FY15 came in line with the latest forecasts as per RBI’s Professional Forecasters’ survey in September 2014 Source : RBI Yearly Estimate of Growth Rates 2014-15 2015-16 Real GDP 5.5% 6.5% Agriculture 1.9% 3.5% Industry 3.9% 5.0% Services 7.0% 7.6% Private Final Consumption 12.1% 12.9% Next Quarter Estimates Economy is forecasted to grow @ 5.4% in the second quarter Actual Vs Forecasts - Q2FY15 Forecast Actual Deviation Real GDP 5.3% 5.3% 0.0% Agriculture 1.3% 3.2% 1.9% Industry 3.2% 2.2% -1.0% Services 6.8% 7.1% 0.3% Private Final Consumption 11.7% 5.8% -5.9% Forecasts : Q3FY15 Q3FY15 Real GDP 5.4% Agriculture 0.9% Industry 4.2% Services 7.1% Private Final Consumption 12.0%
- 4. Key trigger events to watch for Government policies will determine the course of India’s growth The change of government has given a fillip to investor confidence in India. The policy decisions on the much awaited economic reforms (infrastructure, mining & financial sector) are going to be the key trigger points for the Indian economy. Apart from these, the budget to be presented by end of February 2015 is one of the most eagerly awaited events in the next one year The central bank’s (RBI) decision on the policy rates is a much awaited event. It kept the policy rates unchanged in the latest policy review meeting, but sounded dovish. Inflation is below RBI’s Jan 2015 target of 8%. The central bank is concerned about upside risks to its inflation target. The market widely expects deep cuts in policy rates starting H1 CY15 12-month moving average of GDP growth, points to mild recovery after bottoming out in early 2014 GDP growth at Factor cost & 12-Month Moving Average 12% 11% 10% 9% 8% 7% 6% 5% GDP at factor cost 12-Month Moving Average Source : CSO; Compiled by : Finalytiks 5.3% 5.0% 4% Q1FY10 Q2FY10 Q3FY10 Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15
- 5. Economy slows Gross Domestic Product Growth - Current Vs. Previous Quarter GDP at Factor Cost GDP at Market Price Q1 FY15 Q2 FY15 Q1 FY15 Q2 FY15 5.7% 5.3% 5.9% 6.0% q p Economic Activity Based Classification (at Factor cost) Agriculture & Allied Industry Services Q1 FY15 Q2 FY15Q1 FY15 Q2 FY15Q1 FY15 Q2 FY15 3.8% 3.2% 4.2% 2.2% 6.8% 7.1% q q p Expenditure Based Classification (at Market prices) Government Final Consumption Expenditure Private Final Consumption Expenditure Gross Fixed Capital Formation Q1 FY15 Q2 FY15Q1 FY15 Q2 FY15Q1 FY15 Q2 FY15 8.8% 10.1% 5.6% 5.8% 7.0% 0.0% p p q Imports Net Exports (Negative) p Exports Q1 FY15 Q2 FY15Q1 FY15 Q2 FY15Q1 FY15 Q2 FY15 11.5% -1.6% -0.4% 1.1% -30.2% 13.4% q p
- 6. Industry & Agri slows down, Services see pick-up Industry grew @2.2% during Q2FY15 compared to 4.2% in the previous quarter Slow down in manufacturing shaved off 0.6% from GDP growth when compared with the previous quarter Agricultural growth again slowed to 3.2%, compared to 3.8% in the previous quarter Viewing from the demand-side (expenditure-based calculation), Gross Fixed Capital Formation (GFCF) was flat, compared to an impressive 7% growth in the previous quarter Government expenditure grew at 10.1% during the quarter, compared to 8.8% growth in the previous quarter GDP at factor cost (Supply-wide) : Change compared to previous quarter growth 5.7% -0.2% 6% 5% 4% 3% 2% 1% Source : CSO; Compiled by : Finalytiks -0.6% 0.3% 5.3% 0% Previous qtr Agriculture Industry Services Current qtr
- 7. GDP : at factor cost (Supply-side) Agriculture grew @3.2% compared to 3.8% in the previous quarter. This is slightly lower than the CAGR of 3.9% over the past 10 years Industry grew @2.2% compared to 4.2% in the previous quarter, way lower than 10-year CAGR of 6.6% Services sector continued to support the economic growth, and grew @7.1% during the quarter, compared to 6.8% during the previous quarter. But again, this is lower than 10-year CAGR of 8.9% Agriculture growth (YoY %) 14% 12% 10% 8% 6% 4% 2% 0% Source : CSO; Compiled by : Finalytiks 6.3% 3.2% 3.8% -2% Q1FY10 Q2FY10 Q3FY10 Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 Industrial growth (YoY %) 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% Source : CSO; Compiled by : Finalytiks 4.2% -0.2% 2.2% -2% Q1FY10 Q2FY10 Q3FY10 Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 Services growth (YoY %) 14% 12% 10% 8% 6% 4% 2% Source : CSO; Compiled by : Finalytiks 6.4% 7.1% 6.8% 0% Q1FY10 Q2FY10 Q3FY10 Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15
- 8. GDP : Sector wise Services sector, representing >60% of the economy, contributed 4.4% out of total growth of 5.3%. That is roughly 83% contribution out of total growth Industry, representing ~26% of the economy, contributed 0.6% to the total growth Agriculture contributed 0.4% to GDP growth. It represents ~11% of the economy Contribution to Total GDP growth by each sector Agriculture & allied Industry Services GDP at factor cost 4.5% 4.6% 4.4% 4.4% 4.7% 7% 6% 5% 4% 3% 2% 1% 0% Source : CSO; Compiled by : Finalytiks 5.2% 4.6% 4.6% 5.7% 5.3% -1% Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 Sector wise composition of GDP in second quarter of Financial year Agriculture Industry Services 10.8% 25.9% 63.3% 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Q2FY05 Q2FY06 Q2FY07 Q2FY08 Q2FY09 Q2FY10 Q2FY11 Q2FY12 Q2FY13 Q2FY14 Q2FY15 Source : CSO; Compiled by : Finalytiks
- 9. GDP : Industrial Growth Manufacturing growth was @0.1% compared to 3.5%. The previous quarter growth was the highest in the past 10 quarters Construction grew @4.6% compared to 4.8% in the previous quarter Electricity, Gas &Water supply slowed to 8.7%, compared to 10.2% in the previous quarter. The previous quarter growth was the highest in the past 3 years Mining grew @1.9%, compared to 2.1% in the previous quarter. Mining continued to grow for two quarters, after contracting for 8 consecutive quarters Manufacturing growth (YoY %) 25% 20% 15% 10% 5% 0% Source : CSO; Compiled by : Finalytiks 4.2% -1.4% 3.5% 0.1% -0.2% 2.2% -5% Manufacturing Industry Q1FY10 Q2FY10 Q3FY10 Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 Construction growth (YoY %) 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% -2% Source : CSO; Compiled by : Finalytiks 4.8% 4.6% 0.7% -0.2% 4.2% 2.2% -4% Construction Industry Q1FY10 Q2FY10 Q3FY10 Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 Mining & Electricity growth (YoY %) 12% 10% 8% 6% 4% 2% 0% -2% -4% Mining & Quarrying Electricity, Gas & Water supply Source : CSO; Compiled by : Finalytiks 10.2% 2.1% 1.9% 7.2% -0.4% 8.7% -6% Q1FY10 Q2FY10 Q3FY10 Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15
- 10. Industry : Contribution & Composition Manufacturing constituted ~57%of total Industry (~15% of GDP), but did not contribute to the GDP growth for the quarter. Construction constituted~29% of total industry (~7% of GDP) during the quarter, and contributed 1.3% to Industrial growth (0.3% to GDP growth) Industry-wise contribution to Total Industrial growth 0.3% Mining & Quarrying Manufacturing Electricity, Gas & Water supply Construction Industry -0.4% 1.7% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Source : CSO; Compiled by : Finalytiks 2.1% -0.4% 2.6% 4.2% -0.4% -0.2% 2.2% -1.0% Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 Industry wise composition (%) of Total Industry size Manufacturing Construction Electricity etc. Mining 56.5% 28.8% 8.0% 6.7% 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Q1FY10 Q2FY10 Q3FY10 Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 Source : CSO; Compiled by : Finalytiks
- 11. GDP : Services sector Trade, Hotels, Transport & Communication slowed down to 3.8% YoY. The sector has been slowing since Q1FY12, and has grown below 5% in 11 out of the past 13 quarters Finance, Insurance, Real estate & Business services slowed to 9.5%, compared to 10.4% in the previous quarter. This sector is one of the fastest growing sectors. The sector has grown at above 10% for 32 out of the past 38 quarters (since the beginning of 2004-05 series). Current quarter growth is the lowest in the past 14 quarters Community, Social & Personal services grew @9.6% compared to 9.1% in the previous quarter. This is in line with increase in government spending of 10.1% during the quarter Trade, Hotels, Transport, Communication 18% 16% 14% 12% 10% 8% 6% 4% 2% Source : CSO; Compiled by : Finalytiks 3.9% 3.8% 2.8% 0% Q1FY10 Q2FY10 Q3FY10 Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 Finance, Insurance, Real estate, Business services 16% 14% 12% 10% 8% 6% 4% 2% Source : CSO; Compiled by : Finalytiks 12.4% 10.4% 9.5% 0% Q1FY10 Q2FY10 Q3FY10 Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 Community, Social & Personal services 20% 15% 10% 5% 0% Source : CSO; Compiled by : Finalytiks 9.1% 3.3% 9.6% -5% Q1FY10 Q2FY10 Q3FY10 Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15
- 12. Services Sector : Contribution & Composition Trade, Hotels, Transport & Communication contributed 1.6% out of the total services sector growth of 7.1%. Despite having the highest weight among services sector (~42% of services sector), it was the lowest contributor to growth among the three services sectors. The sector constitutes 27% of the GDP and contributed just 1% to GDP growth. Financing, Insurance, Real estate & Business services continued to contribute strongly to growth, contributing 3.2% to services sector growth. This sector was also the top contributor to GDP growth, adding 2% out of the GDP growth of 5.3%. Since the slowdown of Trade etc., from FY 2011-12, Financing etc. has been the top contributor to GDP growth Community, Social & Personal services contributed 2.2% to services sector growth and 1.3% to total GDP growth (constitutes ~23% of services; ~15% of GDP). Contribution to Services sector growth 7.2% Trade, Hotels, Transpt & Communi Finance, Insur, Real est & Bus serv Community, Social & Personal Serv Services 6.3% 8% 7% 6% 5% 4% 3% 2% 1% Source : CSO; Compiled by : Finalytiks 7.2% 6.4% 6.8% 7.1% 0% Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Composition of Services Sector Trade, Hotels, Transport & Financing, Insurance, Real Community, Social & Communication Estate & Business Services Personal Services 42.2% 34.8% 23.0% 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Q1FY10 Q2FY10 Q3FY10 Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 Source : CSO; Compiled by : Finalytiks
- 13. GDP – Quarterly Growth : Supply-side Sector wise GDP Growth (at Factor Cost) Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 Agriculture, Forestry & Fishing 1.8% 1.8% 0.8% 1.6% 4.0% 5.0% 3.7% 6.3% 3.8% 3.2% Mining & Quarrying -1.1% -0.1% -2.0% -4.8% -3.9% 0.0% -1.2% -0.4% 2.1% 1.9% Manufacturing -1.1% 0.0% 2.5% 3.0% -1.2% 1.3% -1.5% -1.4% 3.5% 0.1% Electricity, Gas & Water Supply 4.2% 1.3% 2.6% 0.9% 3.8% 7.8% 5.0% 7.2% 10.2% 8.7% Construction 2.8% -1.9% 1.0% 2.4% 1.1% 4.4% 0.6% 0.7% 4.8% 4.6% Total Industry 0.3% -0.4% 1.7% 2.1% -0.4% 2.6% -0.4% -0.2% 4.2% 2.2% Trade, Hotels, Transport & Communication 4.0% 5.6% 5.9% 4.8% 1.6% 3.6% 2.9% 3.9% 2.8% 3.8% Financing, Insurance, Real Estate & Business Services 11.7% 10.6% 10.2% 11.2% 12.9% 12.1% 14.1% 12.4% 10.4% 9.5% Community, Social & Personal Services 7.6% 7.4% 4.0% 2.8% 10.6% 3.6% 5.7% 3.3% 9.1% 9.6% Total Services 7.2% 7.6% 6.9% 6.3% 7.2% 6.3% 7.2% 6.4% 6.8% 7.1% GDP At Factor Cost 4.5% 4.6% 4.4% 4.4% 4.7% 5.2% 4.6% 4.6% 5.7% 5.3% Red highlight means that growth rate has improved compared to the previous quarter, Green highlight indicates that it has decreased Sector wise contribution to GDP Growth (at Factor Cost) Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 Agriculture, Forestry & Fishing 0.3% 0.2% 0.1% 0.2% 0.5% 0.6% 0.6% 0.9% 0.5% 0.4% Mining & Quarrying 0.0% 0.0% 0.0% -0.1% -0.1% 0.0% 0.0% 0.0% 0.0% 0.0% Manufacturing -0.2% 0.0% 0.4% 0.5% -0.2% 0.2% -0.2% -0.2% 0.5% 0.0% Electricity, Gas & Water Supply 0.1% 0.0% 0.0% 0.0% 0.1% 0.2% 0.1% 0.1% 0.2% 0.2% Construction 0.2% -0.1% 0.1% 0.2% 0.1% 0.3% 0.0% 0.1% 0.4% 0.3% Total Industry contribution to GDP 0.1% -0.1% 0.5% 0.6% -0.1% 0.7% -0.1% -0.1% 1.1% 0.6% Trade, Hotels, Transport & Communication 1.1% 1.5% 1.5% 1.3% 0.4% 1.0% 0.8% 1.1% 0.7% 1.0% Financing, Insurance, Real Estate And Business Services 2.1% 2.0% 1.8% 1.9% 2.5% 2.4% 2.6% 2.3% 2.2% 2.0% Community, Social & Personal Services 0.9% 1.0% 0.5% 0.4% 1.3% 0.5% 0.7% 0.4% 1.1% 1.3% Total Services sector contribution to GDP 4.1% 4.5% 3.8% 3.6% 4.2% 3.9% 4.0% 3.8% 4.1% 4.4% GDP At Factor Cost (Total) 4.5% 4.6% 4.4% 4.4% 4.7% 5.2% 4.6% 4.6% 5.7% 5.3% Red highlight means that contribution to GDP growth rate has improved compared to the previous quarter, Green highlight indicates that it has decreased Source : CSO; Compiled by : Finalytiks
- 14. GDP – Yearly Growth : Supply-side Sector wise GDP Growth (at Factor Cost) Industry/Items 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 Agriculture, Forestry & Fishing 4.2% 5.8% 0.1% 0.8% 8.6% 5.0% 1.4% 4.7% Mining & Quarrying 7.5% 3.7% 2.1% 5.9% 6.5% 0.1% -2.2% -1.4% Manufacturing 14.3% 10.3% 4.3% 11.3% 8.9% 7.4% 1.1% -0.7% Electricity, Gas & Water Supply 9.3% 8.3% 4.6% 6.2% 5.3% 8.4% 2.3% 5.9% Construction 10.3% 10.8% 5.3% 6.7% 5.7% 10.8% 1.1% 1.6% Total Industry 12.2% 9.7% 4.4% 9.2% 7.6% 7.8% 1.0% 0.4% Trade, Hotels, Transport & Communication 11.6% 10.9% 7.5% 10.4% 12.2% 4.3% 5.1% 3.0% Financing, Insurance, Real Estate And Business Services 14.0% 12.0% 12.0% 9.7% 10.0% 11.3% 10.9% 12.9% Community, Social & Personal Services 2.8% 6.9% 12.5% 11.7% 4.2% 4.9% 5.3% 5.6% Total Services 10.1% 10.3% 10.0% 10.5% 9.7% 6.6% 7.0% 6.8% GDP At Factor Cost 9.6% 9.3% 6.7% 8.6% 8.9% 6.7% 4.5% 4.7% Red highlight means that growth rate has improved compared to the previous year, Green highlight indicates that it has decreased Sector wise contribution to GDP Growth (at Factor Cost) 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 Agriculture, Forestry & Fishing 0.8% 1.0% 0.0% 0.1% 1.3% 0.7% 0.2% 0.7% Mining & Quarrying 0.2% 0.1% 0.1% 0.1% 0.2% 0.0% 0.0% 0.0% Manufacturing 2.2% 1.6% 0.7% 1.8% 1.4% 1.2% 0.2% -0.1% Electricity, Gas & Water Supply 0.2% 0.2% 0.1% 0.1% 0.1% 0.2% 0.0% 0.1% Construction 0.8% 0.9% 0.4% 0.5% 0.4% 0.8% 0.1% 0.1% Total Industry contribution to GDP 3.4% 2.8% 1.3% 2.6% 2.1% 2.2% 0.3% 0.1% Trade, Hotels, Transport & Communication 2.9% 2.8% 1.9% 2.7% 3.2% 1.2% 1.4% 0.8% Financing, Insurance, Real Estate And Business Services 2.1% 1.9% 1.9% 1.6% 1.7% 2.0% 2.0% 2.5% Community, Social & Personal Services 0.4% 0.9% 1.6% 1.5% 0.6% 0.6% 0.7% 0.7% Total Services sector contribution to GDP 5.4% 5.5% 5.4% 5.9% 5.5% 3.8% 4.0% 4.0% GDP At Factor Cost (Total) 9.6% 9.3% 6.7% 8.6% 8.9% 6.7% 4.5% 4.7% Red highlight means that contribution to GDP growth rate has improved compared to the previous year, Green highlight indicates that it has decreased Source : CSO; Compiled by : Finalytiks
- 15. GDP : Expenditure (Demand-side) Expenditure Based Classification (at Market prices) Government Final Consumption Expenditure Private Final Consumption Expenditure Gross Fixed Capital Formation p p q Imports Net Exports (Negative) p Exports Government spending increased by 10.1% during the quarter, compared to 8.8% in the previous quarter. Government expenditure constituted ~11% of the economy Private consumption continued to disappoint with a slow growth of 5.8% compared to 5.6% recorded in the previous quarter. Private consumption constituted ~60% of GDP Gross Fixed Capital Formation was flat, compared to a very impressive 7% in the previous quarter Contribution of each demand-side component to Total GDP growth (at Market Price) 4.2% 5.2% 10% 8% 6% 4% 2% 0% -2% -4% Source : CSO; Compiled by : Finalytiks 4.4% 6.1% 5.9% 6.0% -6% Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Government FCE Private FCE Gross Fixed CF Change in stock Valuables Net exports Discrepancies GDP at market prices Composition of GDP from Demand (expenditure) side 120% 100% 80% 60% 40% 20% 0% Government FCE Private FCE Gross Fixed Capital Formation Others Net exports Source : CSO; Compiled by : Finalytiks 120% 100% 80% 60% 40% 20% 0% -20% -20% 2009-10: Q1 2009-10: Q2 2009-10: Q3 2009-10: Q4 2010-11: Q1 2010-11: Q2 2010-11: Q3 2010-11: Q4 2011-12: Q1 2011-12: Q2 2011-12: Q3 2011-12: Q4 2012-13: Q1 2012-13: Q2 2012-13: Q3 2012-13: Q4 2013-14: Q1 2013-14: Q2 2013-14: Q3 2013-14: Q4 2014-15: Q1 2014-15: Q2 Q1 FY15 Q2 FY15Q1 FY15 Q2 FY15Q1 FY15 Q2 FY15 8.8% 10.1% 5.6% 5.8% 7.0% 0.0% Q1 FY15 Q2 FY15Q1 FY15 Q2 FY15Q1 FY15 Q2 FY15 11.5% -1.6% -0.4% 1.1% -30.2% 13.4% q p
- 16. GDP : Government expenditure Government expenditure picked up further during the quarter Higher government expenditure had a positive impact on Community, Social & Personal services, which grew by 9.6%, compared to 9.1% in the previous quarter Lower spending by the government to contain fiscal deficit in the fourth quarter of FY 2013-14 led to government consumption contracting by 0.4% in Q4FY14 Fiscal deficit has reached ~90% of the full year estimated deficit as at the end of October 2014. This is at the same level as at the end of October 2013 Government Final Consumption Expenditure 30% 25% 20% 15% 10% 5% 0% Source : CSO; Compiled by : Finalytiks 8.8% -0.4% 10.1% -5% Q1FY10 Q2FY10 Q3FY10 Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 Fiscal deficit build up (% of Full year fiscal deficit) 120% 100% 80% 60% 40% 20% Source : Ministry of Finance; Compiled by : Finalytiks 75.0% 90.1% 89.6% 0% Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar 2012-13 2013-14 2014-15 Govt expenditure Vs Community, Social & Personal services 30% 25% 20% 15% 10% 5% 0% Govt final consumption exp Community, Social & Personal serv Source : CSO; Compiled by : Finalytiks 9.1% -0.4% 10.1% 8.8% 3.3% 9.6% -5% Q1FY10 Q2FY10 Q3FY10 Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15
- 17. GDP : Private consumption Private consumption was the black-spot in the GDP numbers, growing at 5.8% growth in the current quarter, compared to 5.6% in the previous quarter 12-month moving average shows a growing trend Private consumption constitutes ~60% of the GDP, when viewed from the demand-side, and hence is the most important factor in GDP growth. Lack of major turn-around in private spending is a cause of worry After ruling at high levels for 2 years, retail-level inflation has come down of late With RBI determined to contain inflationary pressures, interest rates are yet to come down. Hence credit-based purchases might be getting postponed, as consumers are unwilling to take on higher-rate debt Inflation is below RBI’s Jan 2015 target of 8%. RBI left interest rates unchanged in the previous monetary policy review, citing upside risks to its inflation target. RBI is not expected to cut interest rates this year, but sounded dovish in the last policy briefing. The market widely expects deep cuts in policy rates starting 1HCY15 Private Final Consumption Expenditure & 12-month moving average 14% 12% 10% 8% 6% 4% 2% Private Final Consumption Expenditure 12-month moving average growth Source : CSO; Compiled by : Finalytiks 5.6% 5.8% 4.9% 5.6% 0% Q1FY10 Q2FY10 Q3FY10 Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15
- 18. GDP : Fixed Capital Formation Gross Fixed Capital Formation, did not grow in the current quarter, compared to a growth of 7% in the previous quarter. 12-month moving average point to upward movement, from near-contraction growth rates, experienced in the past two years Private spending has to pick up, to give confidence for corporates to invest in capex Gross Fixed Capital Formation & 12-month moving average 25% 20% 15% 10% 5% 0% Gross Fixed Capital Formation 12-month moving average growth Source : CSO; Compiled by : Finalytiks 7.0% -0.9% 1.4% 0.0% -5% Q1FY10 Q2FY10 Q3FY10 Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15
- 19. GDP : Exports & Imports Exports, after growing at double digits for the consecutive 4 quarters, contracted by 1.6% during the quarter Imports grew at 1.1%, after shrinking for 3 consecutive quarters Net exports (which is negative, i.e., on net basis, India is importing goods) have widened, with imports growing and exports contracting Exports & Imports 40% 30% 20% 10% 0% -10% Source : CSO; Compiled by : Finalytiks 11.5% -1.6% -0.4% 1.1% -20% Q1FY10 Q2FY10 Q3FY10 Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 Exports Imports Net exports (Negative) 120% 100% 80% 60% 40% 20% 0% -20% -40% Source : CSO; Compiled by : Finalytiks -30.2% 13.4% -47.5% -60% Q1FY10 Q2FY10 Q3FY10 Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15
- 20. GDP : Exports – Rupee & Growth of Major economies Indian Rupee (INR) has depreciated significantly over the past 2 years. Though as per Real Effective Exchange Rates (36-countries, trade-weighted), INR continues to be in over-valued territory, the degree of over-valuation has significantly reduced (REER value more than 100 shows over-valuation) With EU growth in positive territory (YoY basis, to enable comparison with India) major developed countries have recovered from recession, and the growth rates have stabilised Despite Japan falling in to recession recently, pick-up in EU & US augurs well for the export sector, with INR depreciation adding to the cost-competitiveness of Indian goods. 70 65 60 55 50 45 40 35 INR/USD Nominal (LHS) CPI based REER (RHS) Major Global Economics : GDP growth YoY 12% 10% 8% 6% 4% 2% 0% -2% -4% -6% -8% Q1-2009 Q2-2009 Q3-2009 Q4-2009 Q1-2010 Q2-2010 Q3-2010 Q4-2010 Q1-2011 Q2-2011 Q3-2011 Q4-2011 Q1-2012 Q2-2012 Q3-2012 Q4-2012 Q1-2013 Q2-2013 Q3-2013 Q4-2013 Q1-2014 Q2-2014 Q3-2014 Source: OECD G20 China EU (28 countries) US REER Vs Nominal rates Source: RBI, Compiled by : Finalytiks 90 95 100 105 110 115 30 120 Apr-04 Oct-04 Apr-05 Oct-05 Apr-06 Oct-06 Apr-07 Oct-07 Apr-08 Oct-08 Apr-09 Oct-09 Apr-10 Oct-10 Apr-11 Oct-11 Apr-12 Oct-12 Apr-13 Oct-13 Apr-14 Oct-14
- 21. GDP Growth : Expenditure side Expenditure (Demand) side : GDP Growth Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 Government Final Consumption Expenditure 10.2% 9.9% 4.5% 1.8% 12.9% -0.1% 3.6% -0.4% 8.8% 10.1% Private Final Consumption Expenditure 5.0% 4.7% 5.1% 5.1% 5.6% 2.8% 2.8% 8.2% 5.6% 5.8% Gross Fixed Capital Formation -4.1% -0.6% 4.4% 3.3% -2.8% 3.1% 0.2% -0.9% 7.0% 0.0% Change in Stock -11.0% -10.0% -7.8% -7.3% 1.2% 3.7% 0.8% 0.9% 2.5% -0.6% Valuables 31.3% 29.9% 54.2% 29.7% -32.6% -31.1% -41.1% -20.9% -50.7% -27.0% Total before Net exports 2.8% 3.8% 5.5% 4.5% 2.5% 1.6% 0.9% 3.6% 5.3% 3.6% Exports Of Goods And Services 15.1% 10.2% -1.7% -1.4% -2.8% 15.0% 11.3% 10.5% 11.5% -1.6% Less Imports Of Goods And Services 10.0% 11.2% 3.6% 2.3% 1.7% 0.4% -8.3% -3.7% -0.4% 1.1% Total Net exports -2.8% 13.6% 18.2% 15.6% 15.0% -36.7% -52.9% -47.5% -30.2% 13.4% Discrepancies -15.2% -43.5% -22.3% 72.7% -91.0% 17.6% 75.4% -42.7% 1143.6% -126.0% Expenditure On GDP 4.0% 4.7% 5.3% 4.9% 4.2% 5.2% 4.4% 6.1% 5.9% 6.0% Red highlight means that growth rate has improved compared to the previous quarter, Green highlight indicates that it has decreased Expenditure (Demand) side : GDP Growth 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 Government Final Consumption Expenditure 3.8% 9.6% 10.4% 13.9% 5.8% 6.9% 6.2% 3.8% Private Final Consumption Expenditure 8.5% 9.4% 7.2% 7.4% 8.7% 9.3% 5.0% 4.8% Gross Fixed Capital Formation 13.8% 16.2% 3.5% 7.7% 11.0% 12.3% 0.8% -0.1% Change in Stock 31.6% 31.3% -51.4% 67.7% 44.7% -43.4% -9.0% 1.6% Valuables 13.7% 2.9% 26.9% 57.6% 32.4% 6.6% 35.8% -31.6% Total before Net exports 10.2% 12.1% 4.3% 9.8% 10.5% 8.0% 4.2% 2.1% Exports Of Goods And Services 20.4% 5.9% 14.6% -4.7% 19.6% 15.6% 5.0% 8.4% Less Imports Of Goods And Services 21.5% 10.2% 22.7% -2.1% 15.6% 21.1% 6.6% -2.5% Total Net exports 28.7% 35.6% 60.5% 6.3% 3.7% 39.9% 11.0% -32.1% Discrepancies 47.5% 111.8% -75.3% 258.1% 43.7% -18.9% -50.2% 28.1% Expenditure On GDP 9.3% 9.8% 3.9% 8.5% 10.3% 6.6% 4.7% 5.0% Red highlight means that growth rate has improved compared to the previous year, Green highlight indicates that it has decreased Source : CSO; Compiled by : Finalytiks
- 22. Appendix / Disclaimer All growth rates / changes mentioned in this article are changes over the same period of previous year (i.e., year-on-year). This is because, India does not publish seasonally adjusted numbers of GDP / inflation Disclaimer : The information set forth herein has been obtained or derived from sources generally available to the public and believed by the author to be reliable, but the author does not make any representation or warranty, express or implied, as to its accuracy or completeness. The information is not intended to be used as the basis of any investment decisions by any person or entity. This information does not constitute investment advice, nor is it an offer or a solicitation of an offer to buy or sell any security. Readers are advised to do their own research before undertaking investment actions. Your feedback is very valuable to me. Kindly send your feedback to finalytiks@gmail.com