We know that today’s GDP reflects the growth of Q1FY19 but somehow, in a scenario where the Indian rupee has depreciated almost 11% in since Januray’18, hitting a new low every day, this number looks unreal! It’s like looking back at some history which has no lessons to preach in today’s time.
Above 7% was a given and most of the analysts had pegged it at 7.1% to 7.7%. And it did not disappoint; it in fact shocked us all – it came in at a jaw dropping 8.2%! This was against 5.7% (YoY) and 7.7% (QoQ). So it is more than just a base effect. We can say that recovery is surely on its way but mainly on the domestic front; we cannot dismiss the fact that external conditions are not very favourable and the falling rupee and rising fuel prices, uncertainty on global trade front – all will have some impact on the coming quarters through exports, which ultimately will impact companies and domestic growth. Sorry to be a party-pooper but let us not yet get into a celebratory mode.
The economic activities which registered growth of over 7% in Q1FY19 (QoQ) are ‘manufacturing, ‘electricity, gas, water supply & other utility services’ ‘construction’ and ‘public administration, defence and other services’. The growth in the ‘agriculture, forestry and fishing’, ‘mining and quarrying’, ‘Trade, hotels, transport, communication and services related to broadcasting’ and financial, real estate and professional services is estimated to be 5.3%, 0.1%, 6.7% and 6.5% respectively during this period.
What these numbers indicate is that there is indeed broad based recovery and it is not just lower base effect. Corporate earnings had a big role to play in the manufacturing growth but IIP numbers have been soft month-after-month. So it would be too early to say that it is just manufacturing which contributed to the GDP but in some sense, it truly indicates that GST and demon pain are finally behind us.
This GDP number will provide the Narendra Modi government some relief after the recent the GDP back series data showed higher growth rate during the UPA period than the current govt. Ironically, while GDP is growing at a break neck speed, unemployment rate among graduates is increasing - over 2.8 crore applicants applied for 90,000 jobs offered by the Indian Railways; two lakh applicants applied for 1,137 police constable jobs in Mumbai; 12,500 applicants applied for a peon job in Rajasthan Assembly, 25 lakh appeared for 6,000 group ‘D’ jobs in West Bengal.
Thus there is somewhere a feeling that GDP and the ground reality are disconnected.
For now, let us enjoy the moment and introspect over these numbers during the quieter moments of the weekend. Monday, barring any other unforeseen circumstance, the markets will react positively though the plummeting rupee will remain the focus.