Q2FY13 GDP - THE 'TALAASH' FOR GROWTH CONTINUES....
By Ruma Dubey
It’s a complete non-event. With Q2FY13 GDP coming at 5.3% the market simply shrugged it off and moved on, shifting its focus back to individual stocks and the Parliament. This 5.3% number puts things right where they were, very much what RBI has been saying all along. With agri growth not really showing much improvement, which is again what RBI has been maintaining, in all likelihood, RBI will also maintain a status quo, continue sitting on its hand as this current number does not really warrant any action.
In Q1FY13, the growth propeller was construction, followed by financial services. And farm output had also come in at much better levels than expected. But in current Q2, financial services did the best, which included insurance, real estate and business services did the best. Service sector which had slumped in previous quarter has once again shown a bounce back in Q2 though it remains much below the 9.3% growth shown in Q2FY12. Construction has slumped considerably and the key indicators of construction sector used for calculating the GDP are cement and consumption of finished steel.
The fall in farm output is very much on expected lines given the erratic monsoon. The farm output includes, apart from crops, production of fruits and vegetables, other crops, livestock products, forestry and fisheries. Acccording to the First Advance Estimates of Production of Foodgrains, Oilseeds and other Commercial Crops for 2012-13 released by the Department of Agriculture and Cooperation on 24th Sept’12, production of rice, coarse cereals, pulses and oilseeds are expected to decline by 6.5%, 18.4%, 14.5% and 9.6% respectively during the Kharif season of 2012-13 as compared to the production of these crops in the Kharif season of 2011-12. Thus looking ahead, agri production might continue to show moderation.
Based on Q1 and Q2, estimates for H1FY13 shows that GDP is at 5.4% compared to 7.3% (YoY). In H1, the worst performer has been manufacturing, followed by mining and the best remains financial services.
Very real supply constraints have developed like in infra, mainly land acquisitions which does not require big bang reforms. The fall in manufacturing is alarming and this is a direct consequence of the fall in investments and many projects getting stalled. The CMIE report which stated that over Rs.5 lakh crore worth investments currently stands stalled or cancelled comes all the more into perspective.
The only good part is that when Q1 numbers were out, corporate confidence was at its lowest and this time around, by end of Q2, this has done a complete roundabout. The Govt is showing that it has the will to get things moving, finally. The breaking of the logjam in the Parliament over the FDI issue is a huge confidence booster. And if it goes through in both the Houses, the market moods will zoom up for good.
Q3 is usually good given the festive demand and overall buoyancy in sentiments. Globally, the turmoil continues but if things get shored up on the domestic front, we can still remain comfortable. Yet, growth for entire fiscal will remain muted and one expects the fiscal to end with a GDP around 5.5%.