4QFY2013 GDP | Economy

May 31, 2013

4QFY2013 GDP Growth

Real GDP growth at 4.8%, in line with expectations
Key highlights

Bhupali Gursale
022-3935 7800 Ext: 6820 bhupali.gursale@angelbroking.com

Real GDP growth for 4QFY2013 came in at 4.8%, in line with our as well as market expectations, as against 4.7% in the previous quarter and 5.1% in 4QFY2012. Growth in the services sector has decelerated to 6.6% the lowest in about 4 years resulting in a sub-5% reading for GDP growth for the second consecutive quarter. While 3QFY2013 GDP growth has been revised upwards to 4.7% from 4.5% estimated earlier, it has been revised slightly downwards in the three preceding quarters. Overall for FY2013 as a whole, real GDP growth stands at a decadal-low of 5% as compared to 6.2% during FY2012. On the demand-side, GDP at market prices has slumped to 3.2% as growth in consumption, investment as well as exports has more than halved as compared to FY2012. We believe growth has bottomed out in 3QFY2013 and we expect a gradual pick up with recovery in consumption as well as investment to about 5.8% in FY2014.

Trends in economic growth

Growth in agriculture and allied activities continued to remain muted and stood at 1.4% as against 1.8% yoy in 3QFY2013 and 2.0% yoy in 4QFY2012. For FY2013, agriculture reported 1.9% growth, impacted by the decline in food-grain production by 1.5% particularly in the kharif season owing to below-normal monsoon. Non-farm GDP is relatively higher at 5.5% as compared to total output growth of 5% but it has almost halved since FY2010. The growth in industrial sector recovered to 2.7% during the quarter as compared to 2.1% in 4QFY2012 owing to the 2.6% growth in manufacturing sector. For FY2013 as a whole, the mining sector reported 0.6% de-growth despite a low base effect from a similar decline in the previous year reflecting the impact of persistent regulatory hurdles. Growth in the manufacturing sector disappointed coming in at 1.0% in FY2013, a 15 year low. It has decelerated for the third straight year from 11.3% in FY2010. Even growth in electricity and construction decelerated to 4.2% and 4.3% from 6.5% and 5.6% in FY2012 respectively. Growth in the services sector decelerated further to 6.6% during 4QFY2013, the lowest in about 4 years. As the government stepped up its fiscal consolidation drive and curtailed expenditure, the pace of growth in community, social and personal services slowed down for the fourth straight quarter to a moderate 4.0% during the quarter. Overall, growth in the services sector has slipped to 7.1% for FY2013, a 3-year low. The share of services in total GDP has reached 59.6%, its highest level.

Please refer to important disclosures at the end of this report

4QFY2013 GDP | Economy

Exhibit 1: Trends in Real GDP growth (%,yoy)

FY2012 1Q2012 GDP at factor cost Agriculture and Allied Activities Industry Mining and Quarrying Manufacturing Electricity, Gas and Water Supply Construction Services Trade, Hotels, Transport & Communication Financing, Insurance, Real Estate & Business Services Community, Social & Personal Services
Source: MOSPI, Angel Research

FY2013 4Q2012 5.1 2.0 2.1 5.2 0.1 3.5 5.1 7.3 5.1 11.3 6.8 1Q2013 5.4 2.9 1.8 0.4 (1.0) 6.2 7.0 7.7 6.1 9.3 8.9 2Q2013 5.2 1.7 1.3 1.7 0.1 3.2 3.1 7.6 6.8 8.3 8.4 3Q2013 4.7 1.8 2.5 (0.7) 2.5 4.5 2.9 6.7 6.4 7.8 5.6 4Q2013 4.8 1.4 2.7 (3.1) 2.6 2.8 4.4 6.6 6.2 9.1 4.0

2Q2012 6.5 3.2 3.8 (5.3) 3.1 8.4 6.5 8.5 7.0 12.3 6.5

3Q2012 6.0 4.1 2.6 (2.6) 0.7 7.7 6.9 8.3 6.9 11.4 6.8

7.5 5.4 5.7 (0.4) 7.4 6.6 3.8 8.9 9.5 11.6 3.5

Exhibit 2: Bottoming out of real GDP growth

(%) 12.0 10.0 8.0 6.0 4.0 2.0 0.0 1QFY09 2QFY09 3QFY09 4QFY09 1QFY10 2QFY10 3QFY10 4QFY10 1QFY11 2QFY11 3QFY11 4QFY11 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 5.8 3.5 9.8 8.5 5.9 9.3 7.7 11.4 9.5 Real GDP 9.2 9.9

Exhibit 3: Trends in GDP growth by economic activity

(%) 16.0 12.0 Agriculture Industry Services

8.6

7.5

6.5

6.0

5.1 5.4 5.2 4.74.8

8.0 4.0 0.0 (4.0)

6.6 2.7 1.4 1QFY09 2QFY09 3QFY09 4QFY09 1QFY10 2QFY10 3QFY10 4QFY10 1QFY11 2QFY11 3QFY11 4QFY11 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13

Source: MOSPI, Angel Research

Source: MOSPI, Angel Research

Exhibit 4: Annual trends in GDP at factor cost (%)

FY2009 GDP at Factor Cost Agriculture & allied activities Industry Services Sector-wise share in GDP Agriculture & allied activities Industry Services
Source: MOSPI, Angel Research

FY2010 8.6 0.8 9.2 10.5 14.6 28.3 57.1

FY2011 9.3 7.9 9.2 9.8 14.5 28.2 57.3

FY2012 6.2 3.6 3.5 8.2 14.1 27.5 58.4

FY2013 5.0 1.9 2.1 7.1 13.7 26.7 59.6

FY2014 5.8 2.5 3.5 7.3 13.3 26.2 60.5

6.7 0.1 4.4 10.0 15.8 28.1 56.1

May 31, 2013

4QFY2013 GDP | Economy

Demand-side GDP trends

Despite high discrepancies in data, the sharp slump in economic activity is clearly evident in terms of growth in GDP at market prices which slowed to 3.2%, its lowest level since FY1993. The growth in major components consumption, investment and exports has more than halved as compared to FY2012. The share of consumption in GDP at market prices is the highest at 71% and its growth stood at 3.9% as compared to 8.1% in the previous year owing to deceleration in both government and private consumption. During 4QFY2013, government consumption reported a low 0.6% growth as compared to 7.6% in 4QFY2012 and this corresponds to the slow growth in community, social and personal services. Gross fixed capital formation (GFCF) decelerated to 1.7% in FY2013 as compared to 4.4% in FY2012 and 14.0% in FY2011 concurring with the weak investment climate in the economy. Net exports declined by 17.3% and continued to weigh on growth during FY2013.

Exhibit 5: Share of components in GDP at market prices

(% of GDP) 100 80 60 40 20 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 (20) FY2013

Private final consumption expenditure Gross fixed capital formation Valuables Discrepancies Source: MOSPI, Angel Research

Government final consumption expenditure Changes in stocks Net exports

May 31, 2013

4QFY2013 GDP | Economy

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May 31, 2013

4QFY2013 GDP | Economy

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May 31, 2013