India: Economy grows at slowest pace in four years
August 30, 2013
GDP expanded 4.4% over the same period last year in the April-June period - the first quarter of the fiscal year 2013/2014. The reading represents a deceleration compared to the 4.8% increase observed in the last quarter of the fiscal year 2012/2013 and marks the slowest pace since Q4 2008/2009. In addition, the print came below market expectations of a 4.7% increase in the economy.
The quarterly print reflected that the all-important manufacturing sector contracted 1.2% in the April-June period (Q4 2012/13: +2.6% year-on-year), its worst performance since Q4 2008/2009. In addition, mining and quarrying declined 2.8% in Q1 2013/2014, which followed a 3.1% contraction in Q4 2012/2013. Construction activity lost momentum in the three-month period up to June and expanded 2.8% (Q4 2012/13: +4.4% yoy). Conversely, agriculture grew 2.7% (Q4 2012/13: +1.4% yoy), while growth in financial services remained virtually unchanged compared to the previous quarter (Q4 2012/13: 9.1% yoy; Q1 2013/14: 8.9% yoy).
Despite the slowdown in the first quarter, the government still expects that the economy will grow 5.5% this fiscal year. In addition, the Reserve Bank of India expects GDP growth to reach 5.5% in fiscal year 2013/2014. FocusEconomics Consensus Forecast panellists cut their growth forecast for fiscal year 2013/14 and now expect GDP to grow 5.5%, which is down 0.1 percentage points from last month's forecast. For fiscal year 2014/15, the panel sees economic growth at 6.3%.
Author: Ricardo Aceves, Senior Economist