AS EXPECTED, Q3 INDICATES A SLOWDOWN

Majority of economists had estimated the third quarter GDP to come in at around 6.7 to 6.8% v/s the 7% reported in Q2 and 7.2% (YoY). It was thus a given that growth was expected to show a slowdown in Q3.

So when the actual Q3FY19 GDP came in at 6.6%, it did not really come as a shocker; yes, much lower than what most had estimated. But because it was just a tad weaker, it was not exactly a major upheaval. One can say that it was more or less very much in line with expectations; so do not expect this GDP number to move or shake the markets tomorrow!

The GVA of Gross Value Added growth was estimated to come in at 6.5% v/s 6.6% in Q2. And it too came in lower at 6.3%

Just for information – GVA gives us the growth picture from the perspective of manufacturers or supply side while GDP gives us a picture of growth from the consumers’ or demand side.

Where growth of automobiles is directly linked to the growth of the economy, this comes as no surprise as for past two consecutive quarters, Q2 as well as Q3, there has been a contraction in car sales. Another pointer to this fact is the IIP, which once again, like the car sales, was slowing down in Q2 as well as Q3. Thus with all indicators showing that consumption as well as investments were slowing down, this current slowdown in Q3 GDP does not come as a surprise.

As expected, agri growth did not do well, with growth at 2.7%

Internals of the GDP: (QoQ)

• Construction -  9.6% v/s  8.5%
• Mining – 1.3% v/s -2.7%
• Agriculture – 2.7% v/s 3.8%
• Trade & hotels – 6.9% v/s 6.9%
• Manufacturing - 6.7% v/s 7.4%
• Financial and real estate - 7.3% v/s 7.2%
• Public Admin & Defence - 7.6% 8.7%

Prior to the release of GDP data, we got data showing that growth in eight core sectors - coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity, slowed to 1.8% in Jan.

The FY19 GDP is now lowered to 7% v/s the earlier estimate of 7.2%.

It now seems certain that we have indeed slowed down and going ahead, Q4 too might not present anything divergent from what we are seeing now. Q4 in fact is expected to be even lower. Agri is expected to be lower as rabi data has not been too heartwarming.

Well, as India heads into unchartered territories of escalated tensions across the border and upcoming elections, almost everything will now be on standby. Guess, we hold our breath for the elections outcome more than the GDP numbers till end of May.