Indian economy grew 7.8% in the fourth quarter of FY11 (Apr-Mar), following 8.3% growth in the previous quarter. For full year FY11, GDP grew 8.5% as against 8% during FY10.
The agriculture sector saw strong growth of 6.6% in QFY11, the highest in last seven years. Ironically, agriculture sector has been a great savor for Indian economic growth in FY11. Both the major crops (kharif and rabi) have witnessed a bumper production, thanks to a normal monsoon last year. This year also, the monsoon is expected to be normal, increasing the prospects for healthy agriculture production.
Reflecting the impact of the high interest cost, real investment growth decelerated to 2.2% in 4QFY11, the lowest in eight quarters. Moreover, fixed investment grew only 0.4%, down from 7.8% growth in 3QFY11. However, to some extent, a high base is also responsible for the anaemic investment growth figures.
Private consumption growth at 8% in 4QFY11 (8.6% in FY11 versus 7.3% in FY10) continues to be a major driver for FY11 GDP.
Despite ~10% inflation in FY11, private consumption continued to grow at a healthy pace. With softening of inflation in 2HFY12, I expect private consumption to grow at a healthy ~8% pace. Slowdown in investment growth is a concern. However, forward-looking indicators such as acceleration in credit flow to industry (ex infra), sequential improvement in industrial growth and pricing power with manufacturers show likelihood of investment recovery in the second half of FY12. With a normal monsoon and investment recovery in 2H, 8.5% GDP growth looks likely in FY12.
Therefore, according to me, strong private consumption growth, pick in investment and buoyant exports outlook make me believe that the Indian growth story is likely to remain strong and all the long term fundamentals are very much intact.
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Clearly, Indian economy is getting hit by decline in consumption in the West. The government pumping money into the internal consumption does clearly create a massive bubble both in China an India (see housing market as an indicator of that). I would personally stay as far away from India and China as much as I can.
ReplyDeleteI understand your concern...but the fact of the matter is that these two economies are engine of global growth in next two-three decades....if you want to stay away from them its your choice...India is not growing because government is pumping in money but because of its 50 million middle class families which is the third largest in the world and these people have got money to spend and they are deriving India’s growth...not the government!!!
ReplyDeleteIndian economic growth slipped, its because of the prize of of dollar and Indian manufacturing sector growth slowdown. Indian economic growth is slipped to 6.9% and its a lower growth rate after the year 2008.
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Base Oil Manufacturers
The GDP of India was expected to 9% but still it remains within 7%,looks not good.
ReplyDeleteThis is a tough time for the entire world and so is the case for the Indian economy...please follow my latest post for the update on India’s GDP, now I expect it to grow at 5.8% in FY 13.
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