Monday, August 31, 2009

Economy grows by 6.1% in Q1


Indian economy grew an impressive 6.1% in Q1 of FY2010. The YOY growth was at about 7.8% while last quarter(Q4 FY2009) was at about 5.8%. So, QoQ the economy has grwon by around 300 basis points. As government stimulus measures helped spur demand, although a poor monsoon threatens to crimp growth later in the year even as it drives inflation. The economists feel the full impact of drought in certain areas of the country will be seen only in the coming quarters, especially in the Q2 and Q3 of this year.

The segment grouping financing, insurance, real estate and business services led growth in gross domestic product, gaining 8.1% on year. Services sector was pleasant surprise which grew by 7.8%, while as expected Agriculture was worst performing with 2.4% vs 3% last year. The drought situation will only decrease the growth in agriculture in the coming months. Manufacturing and mining grew by 3.4% and 7.9% in June quarter compared with 5.5% and 4.6% respectively in the year-ago quarter.

The whole year GDP guidance is at about 6.1-6.4% taking into consideration the agricultural slowdown and also some counter balance from manufacturing,services and mining sectors. This is below the promised growth of 7% by the Finance Minister in his budgetary speech. Weak rains will hurt purchasing power of consumers in rural areas and drag down industrial output. Drought situation may impact around 400-700 basis points of the total GDP growth.