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Business News/ Market / Mark-to-market/  What to expect from Friday’s GDP data
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What to expect from Friday’s GDP data

It is likely that the GDP numbers will undershoot the advance estimates released by the government in February

In early February, when the Central Statistics Office had released the advance estimates of GDP, unseasonal rains hadn’t lashed India and talk of rural distress were some time away. Photo: AFPPremium
In early February, when the Central Statistics Office had released the advance estimates of GDP, unseasonal rains hadn’t lashed India and talk of rural distress were some time away. Photo: AFP

The last fiscal year’s gross domestic product (GDP) numbers will be released on Friday. It is likely they will undershoot the advance estimates released by the government in February. Imputing numbers for the March quarter from whole-year advance shows GDP is expected to grow at 7.5%. This is predicated on consumption expenditure growth of 11.8%, which appears even more unlikely now than it did two months ago.

In early February, when the Central Statistics Office (CSO) had released the advance estimates of GDP, unseasonal rains hadn’t lashed India and talks of rural distress were some time away. Despite indicators such as the Purchasing Managers’ Indices (PMI) and the Index of Industrial Production (IIP) not showing much promise, the estimates predicted a sharp rise in economic growth based on a new way of calculating output.

Thus, the growth in gross value added in basic prices for the fourth quarter is imputed to be 7.8%, according to the advance estimates. This was driven by forecasts of a 10.6% rise in manufacturing, which had shown a growth of 4.2% and 5.6% in the December and September quarters, respectively. That jump doesn’t seem to be borne out by the corporate numbers, which have been showing revenue growth flatlining. There has not been much of a volumes spike as well, while the IIP is showing growth in single digits.

Secondly, agriculture gross value added is expected to grow at 0.4% in the March quarter after a contraction of 0.4% in the three months ended 31 December. The second advance estimates for foodgrain production showed a decline of 3% from a year ago, because of unseasonal rains, among other things.

The services related parts of the gross value added numbers (combining three categories ranging across trade, hotels, financial services, real estate and public administration services) are expected to grow at 10.5% in the March quarter. It is a comedown from the 13.5% growth in the December quarter, but there are questions surrounding the estimates for the March quarter simply because a government spending squeeze happened in the last two months of the quarter to rein in the fiscal deficit.

As far as consumption goes, what on earth could explain the jump from a 3.5% growth in the December quarter to 11.8% for March quarter? Analysts have been talking about rural consumption slowing down owing to a cutback in government spending in rural areas, worldwide fall in agricultural commodity prices, deceleration in rural wage rise and a decline in gold prices. Even urban consumers have cut back, say companies that have declared their March quarter earnings.

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Published: 27 May 2015, 03:55 PM IST
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