Q4 GDP growth brings cheer

Q4 GDP growth brings cheer
The Hindu Business Line, May 30, 2009, Page 1

Our Bureau, New Delhi

The Indian economy logged a better-than-expected 6.7 per cent growth in 2008-09 despite the global financial meltdown adversely impacting its output in the second-half of the fiscal year under review.

This growth performance is, however, the weakest in six years and lower than the growth rate of 9 per cent or above witnessed in the previous three years. It is within the 6.5-7 per cent growth range projected by the Reserve Bank of India for 2008-09.

The Central Statistical Organisation (CSO) had in February this year pegged the advance GDP growth estimate for 2008-09 at 7.1 per cent.

The country’s GDP grew a robust 5.8 per cent in fourth quarter of 2008-09, lower than 8.6 per cent in the same quarter in the previous year, according to the data released by CSO today. The third quarter GDP growth performance has now been revised upwards to 5.8 per cent from 5.3 per cent.

The stock markets seemed pleased with the CSO’s revised GDP growth estimates for 2008-09, with the benchmark Sensex going up by 330 points for the day. According to the CSO, the downward revision in GDP for 2008-09, at the revised estimate level, was mainly on account of the lower performance in almost all sectors excluding ‘construction’ and ‘community, social and personal services’ than anticipated.

The sectors that saw growth rates of 5 per cent or more are ‘construction’ (7.2 per cent), ‘trade, hotels, transport and communication’ (9 per cent), ‘financing, insurance, real estate and business services’ (7.8 per cent) and ‘community, social and personal services’ (13.1 per cent). GDP at factor cost at constant (1999-2000) prices in 2008-09 is now estimated at Rs 33,39,375 crore (as against Rs 33,51,653 crore estimated earlier on February 9 this year), showing a growth rate of 6.7 per cent.

For the fourth quarter of 2008-09, GDP at factor cost at constant (1999-2000) prices is estimated at Rs 9,02,924 crore, as against Rs 8,53,785 crore in same quarter in previous year, showing a growth of 5.8 per cent. The sectors that registered significant growth rates are construction at 6.8 per cent, ‘trade, hotels, transport and communications’ 6.3 per cent, ‘financing, insurance, real estate and business services’ 9.5 per cent, and ‘community, social and personal services’ 12.5 per cent.

Meanwhile, Moody’s Economy.com said in a note today that the surprise upward revision of December quarter GDP along with the solid result in the March quarter should inject some confidence back into the Indian economy.

The note highlighted that the rise in expenditure on the election campaign may have boosted India’s March quarter performance. However, the downside effects from the external turmoil have been far too strong to be fully offset by the jump in political spending, it said.

On the monetary policy front, as the Indian economy has held up better than expected, the need for further interest rate cuts has eased. That said, the RBI is expected to maintain a loosening bias as the global storm has yet to come to an end, based on Moody’s Economy.com’s forecast that the US economy will not bottom out until October.