http://in.reuters.com/article/india-economy-gdp-idINKBN18R1LY
India loses fastest growing economy tag after sharp growth slowdown
Rajesh Kumar Singh
India's gross domestic product data shocked again on Wednesday as economic growth unexpectedly slumped to its lowest in more than two years in the March quarter, stripping the country of its status as the world's fastest growing major economy.
Annual economic growth at 6.1 percent in the January-March period was even lower than the lowest analyst estimate of 6.5 percent in a Reuters poll. Overall, the median forecast of 36 analysts was for a year-on-year growth of 7.1 percent.
It was also lower than China's growth of 6.9 percent for the first three months of 2017.
The March quarter growth figure is the lowest since the December quarter in 2014, when the economy registered a 6.0 percent growth, Reuters data shows.
While economists, in general, expected a spillover effect of Prime Minister Narendra Modi's decision last November to scrap high-value old banknotes on economic activity, the extent of the slowdown was unexpected.
A Prasanna, an economist at ICICI Securities Primary Dealership, called the data "quite shocking".
"While we agree that a slowdown...fits in with the theme of a slowdown post-November currency swap, the extent of slowdown is puzzling," Prasanna said.
Modi's unexpected decision was aimed at flushing out all the money Indians hide from the taxman, but it had pounded consumer demand in an economy where most people were paid and bought what they needed with cash.
Yet, the GDP data for the October-December quarter, when the cash crunch was at its worst, showed robust economic activity.
India doesn't publish national figures on retail sales. But indicators such as car sales and quarterly earnings of consumer-facing companies since then showed a recovery in consumer spending.
"(It) doesn't quite tally with other evidence which has tended to suggest that growth stabilised or picked up in last quarter," said Shilan Shah, an economist at Capital Economics in Singapore.
SHARP UPWARD HISTORICAL REVISIONS
Some economists including Shah, however, said that the latest GDP figures were closer to the ground reality than the previous ones, which they said were guilty of overestimating growth by as much as 150 basis points.
The sharp slowdown is also being attributed to an unfavourable statistical base as last year's growth figures for the same quarter were revised up by 1.3 percentage points to 9.2 percent.
The upward revision was done after factoring in newly rebased indices for wholesale prices and industrial production, which were released earlier this month.
Prasanna of ICICI Securities also faults the "deflator" for pulling down overall growth in the last quarter. The federal statistics office uses the deflator to strip out price changes to make quarters comparable.
Both wholesale price and consumer price indices have a representation, but the GDP deflator at 5.7 percent for the March quarter was higher than the average wholesale and consumer price inflation for the quarter.
Wednesday's figures, however, have not changed expectations for monetary policy. Analysts still expect the Reserve Bank of India (RBI) to keep interest rates on hold.
"We continue to expect the RBI to remain on pause, with any rate hikes ruled out," said Shubhada Rao, chief economist at YES Bank.
FAULTLINES
The anomalies in the data, however, didn't gloss over the underlying imbalances in Asia's third-largest economy.
Growth is still being driven by consumer and government spending. And capital investments are showing no signs of revival.
Since taking office in May 2014, Modi has stepped up public spending to stimulate private investments. But even after spending billions on dollars on ports, roads, railways and power projects, an upturn in corporate spending remains elusive.
Capital investments fell an annual 2.1 percent in the March quarter.
"The biggest challenge is the lack of, or absence, of private investment," said Upasna Bhardwaj, senior economist, at Kotak Mahindra Bank.
For the 2016/17 fiscal year ending in March, New Delhi reported GDP growth of 7.1 percent, slower than an 8.0 percent expansion a year ago.
(Reporting by Rajesh Kumar Singh; Editing by Douglas Busvine and Toby Chopra)
http://in.reuters.com/article/india-economy-gdp-views-idINKBN18R1MW
Expert Views - India's economy grows 6.1 percent in Jan-March
India's economy grew 6.1 percent in the three months through March from a year earlier, slowing from a provisional 7.0 percent in the previous quarter, government data showed on Wednesday.
That was much lower than the forecasts for annual growth of 7.1 percent in the January-March quarter reflected in a Reuters poll.
Growth for the year ending in March came in at 7.1 percent, in line with the official estimate.
COMMENTS
RADHIKA RAO, GROUP ECONOMIST, DBS
"Higher GVA (gross value added) base effects have played a part in the sharp slowdown in 4QFY17 – as year before growth has been revised sharply up 8.7 percent.
"That aside, slowdown on GVA basis is disappointing, in continuation from the moderation since the first quarter of FY17's 7.1 percent. Suggests spillover slowdown from the December quarter's note ban, when growth had proved to be surprisingly resilient.
"Agriculture and public administration have been the main drivers of growth, barring which the momentum on the ground is soft – especially manufacturing, construction and financial services.
"On the expenditure end, the FY17 storyline is similar to the previous year – consumption and government spending have been key pillars of support, while investment growth continues to lag.
"In this light, focus is next on how the RBI will interpret these numbers. There is a likelihood that the growth and inflation projections are tempered, providing the room for the policy guidance to soften next week.
A PRASANNA, ECONOMIST, ICICI SECURITIES PRIMARY DEALERSHIP
"The data for the full year was not too surprising except for the still wide gap between GVA (gross value added) and GDP. However the data for Q4 is quite shocking.
"While we agree that a slowdown in H2, concentrated in Q4, fits in with the theme of a slowdown post-November currency swap, the extent of slowdown is puzzling. Excluding agriculture and government spending, Q4 GVA expanded by just 3.8 percent yoy. Further the GDP deflator for Q4 has come in at 5.7 percent, which is clearly at odds with the WPI and CPI data for Q4.
"Overall directionally this data is consistent with the other high frequency and macro data but the magnitudes are still questionable due to data issues.
"We expect the MPC (monetary policy committee) to reiterate the neutral stance but acknowledge balanced risks to inflation and tone down the hawkish noises that crept into the discourse in April."
SHUBHADA RAO, CHIEF ECONOMIST, YES BANK
"The lower-than-anticipated fourth quarter GDP number reflects the lingering impact of demonetisation.
"However, incremental data in April shows that growth impulse is improving and economic activity is picking up on the ground.
"We continue to expect the RBI to remain on pause, with any rate hikes ruled out. However the tone will be less hawkish given that both inflation and growth are lower than RBI's projection.
TIRTHANKAR PATNAIK, INDIA STRATEGIST, MIZUHO BANK
"Q4 data is definitely disappointing and clearly reflects some amount of extreme impact from demonetisation. Based on the quarterly numbers, we can expect a strong commentary from the central bank in their next policy meet."
UPASNA BHARDWAJ, SENIOR ECONOMIST, KOTAK MAHINDRA BANK
"The biggest challenge is the lack of, or absence, of private investment given the kind of stressed balance sheet of corporates and alarmingly high NPAs (non-performing assets) of the banks.
"While policy efforts are being adequately made to tackle this, we still have a long way to go before problems get fully resolved."
"We expect a pause on rates but given RBI has been significantly way off the inflation trajectory, we expect a softer tone in the upcoming policy, rather than the extreme hawkish rhetoric we've seen."
ANJALI VERMA, ECONOMIST, PHILLIPCAPITAL INDIA, MUMBAI
"It looks pretty tepid. GVA at 5.6 percent is weak, except for public administration and some bit on agriculture.
"Everything else is very, very weak. Manufacturing is pretty tepid, construction continues to remain very weak despite all the things the government has been saying. It's not looking good. The numbers are not at all good.
"This data is closer to the ground reality than the previous ones.
"Going ahead, I think one key factor will be the banking sector. That's dragging growth substantially. I am surprised why there is still no growth coming in construction, but I think with housing impetus it should happen gradually."
GAURAV DUA, HEAD OF RESEARCH, SHAREKHAN
"The current GDP rate is much closer to ground reality, and it is likely to soften the Reserve Bank's hawkish stance on growth. Hence, I do not expect a rate hike by the RBI anytime soon. Neither do I see a rate cut in the next few months.
"The implementation of GST (goods and services tax) could have a short-term impact, which will reflect on the overall full-year GDP growth, but that is because of the rollout of GST and not because of the tax slabs."
VARUN KHANDELWAL, MANAGING DIRECTOR, BULLERO CAPITAL
"Q4 GDP number was a bit disappointing.
"Since listed companies have reported a slowdown in their earnings for Q3 and Q4, I expect the data to be revised downwards.
"The most significant imbalance in India's growth story is the paucity of job creation. The demographic 'dividend' is slowly turning into a 'tax' as more young people enter the workforce, while the pace of job creation is meagre.
"It is critical that policy makers focus on a more equitable distribution of growth for the long-term socio-political stability of the country."
(Reporting by Samantha Kareen Nair, Tanvi Mehta, Arnab Paul, Abhirup Roy, and Suvashree Dey Choudhury; Compiled by Rafael Nam)
India loses fastest growing economy tag after sharp growth slowdown
Rajesh Kumar Singh
India's gross domestic product data shocked again on Wednesday as economic growth unexpectedly slumped to its lowest in more than two years in the March quarter, stripping the country of its status as the world's fastest growing major economy.
Annual economic growth at 6.1 percent in the January-March period was even lower than the lowest analyst estimate of 6.5 percent in a Reuters poll. Overall, the median forecast of 36 analysts was for a year-on-year growth of 7.1 percent.
It was also lower than China's growth of 6.9 percent for the first three months of 2017.
The March quarter growth figure is the lowest since the December quarter in 2014, when the economy registered a 6.0 percent growth, Reuters data shows.
While economists, in general, expected a spillover effect of Prime Minister Narendra Modi's decision last November to scrap high-value old banknotes on economic activity, the extent of the slowdown was unexpected.
A Prasanna, an economist at ICICI Securities Primary Dealership, called the data "quite shocking".
"While we agree that a slowdown...fits in with the theme of a slowdown post-November currency swap, the extent of slowdown is puzzling," Prasanna said.
Modi's unexpected decision was aimed at flushing out all the money Indians hide from the taxman, but it had pounded consumer demand in an economy where most people were paid and bought what they needed with cash.
Yet, the GDP data for the October-December quarter, when the cash crunch was at its worst, showed robust economic activity.
India doesn't publish national figures on retail sales. But indicators such as car sales and quarterly earnings of consumer-facing companies since then showed a recovery in consumer spending.
"(It) doesn't quite tally with other evidence which has tended to suggest that growth stabilised or picked up in last quarter," said Shilan Shah, an economist at Capital Economics in Singapore.
SHARP UPWARD HISTORICAL REVISIONS
Some economists including Shah, however, said that the latest GDP figures were closer to the ground reality than the previous ones, which they said were guilty of overestimating growth by as much as 150 basis points.
The sharp slowdown is also being attributed to an unfavourable statistical base as last year's growth figures for the same quarter were revised up by 1.3 percentage points to 9.2 percent.
The upward revision was done after factoring in newly rebased indices for wholesale prices and industrial production, which were released earlier this month.
Prasanna of ICICI Securities also faults the "deflator" for pulling down overall growth in the last quarter. The federal statistics office uses the deflator to strip out price changes to make quarters comparable.
Both wholesale price and consumer price indices have a representation, but the GDP deflator at 5.7 percent for the March quarter was higher than the average wholesale and consumer price inflation for the quarter.
Wednesday's figures, however, have not changed expectations for monetary policy. Analysts still expect the Reserve Bank of India (RBI) to keep interest rates on hold.
"We continue to expect the RBI to remain on pause, with any rate hikes ruled out," said Shubhada Rao, chief economist at YES Bank.
FAULTLINES
The anomalies in the data, however, didn't gloss over the underlying imbalances in Asia's third-largest economy.
Growth is still being driven by consumer and government spending. And capital investments are showing no signs of revival.
Since taking office in May 2014, Modi has stepped up public spending to stimulate private investments. But even after spending billions on dollars on ports, roads, railways and power projects, an upturn in corporate spending remains elusive.
Capital investments fell an annual 2.1 percent in the March quarter.
"The biggest challenge is the lack of, or absence, of private investment," said Upasna Bhardwaj, senior economist, at Kotak Mahindra Bank.
For the 2016/17 fiscal year ending in March, New Delhi reported GDP growth of 7.1 percent, slower than an 8.0 percent expansion a year ago.
(Reporting by Rajesh Kumar Singh; Editing by Douglas Busvine and Toby Chopra)
http://in.reuters.com/article/india-economy-gdp-views-idINKBN18R1MW
Expert Views - India's economy grows 6.1 percent in Jan-March
India's economy grew 6.1 percent in the three months through March from a year earlier, slowing from a provisional 7.0 percent in the previous quarter, government data showed on Wednesday.
That was much lower than the forecasts for annual growth of 7.1 percent in the January-March quarter reflected in a Reuters poll.
Growth for the year ending in March came in at 7.1 percent, in line with the official estimate.
COMMENTS
RADHIKA RAO, GROUP ECONOMIST, DBS
"Higher GVA (gross value added) base effects have played a part in the sharp slowdown in 4QFY17 – as year before growth has been revised sharply up 8.7 percent.
"That aside, slowdown on GVA basis is disappointing, in continuation from the moderation since the first quarter of FY17's 7.1 percent. Suggests spillover slowdown from the December quarter's note ban, when growth had proved to be surprisingly resilient.
"Agriculture and public administration have been the main drivers of growth, barring which the momentum on the ground is soft – especially manufacturing, construction and financial services.
"On the expenditure end, the FY17 storyline is similar to the previous year – consumption and government spending have been key pillars of support, while investment growth continues to lag.
"In this light, focus is next on how the RBI will interpret these numbers. There is a likelihood that the growth and inflation projections are tempered, providing the room for the policy guidance to soften next week.
A PRASANNA, ECONOMIST, ICICI SECURITIES PRIMARY DEALERSHIP
"The data for the full year was not too surprising except for the still wide gap between GVA (gross value added) and GDP. However the data for Q4 is quite shocking.
"While we agree that a slowdown in H2, concentrated in Q4, fits in with the theme of a slowdown post-November currency swap, the extent of slowdown is puzzling. Excluding agriculture and government spending, Q4 GVA expanded by just 3.8 percent yoy. Further the GDP deflator for Q4 has come in at 5.7 percent, which is clearly at odds with the WPI and CPI data for Q4.
"Overall directionally this data is consistent with the other high frequency and macro data but the magnitudes are still questionable due to data issues.
"We expect the MPC (monetary policy committee) to reiterate the neutral stance but acknowledge balanced risks to inflation and tone down the hawkish noises that crept into the discourse in April."
SHUBHADA RAO, CHIEF ECONOMIST, YES BANK
"The lower-than-anticipated fourth quarter GDP number reflects the lingering impact of demonetisation.
"However, incremental data in April shows that growth impulse is improving and economic activity is picking up on the ground.
"We continue to expect the RBI to remain on pause, with any rate hikes ruled out. However the tone will be less hawkish given that both inflation and growth are lower than RBI's projection.
TIRTHANKAR PATNAIK, INDIA STRATEGIST, MIZUHO BANK
"Q4 data is definitely disappointing and clearly reflects some amount of extreme impact from demonetisation. Based on the quarterly numbers, we can expect a strong commentary from the central bank in their next policy meet."
UPASNA BHARDWAJ, SENIOR ECONOMIST, KOTAK MAHINDRA BANK
"The biggest challenge is the lack of, or absence, of private investment given the kind of stressed balance sheet of corporates and alarmingly high NPAs (non-performing assets) of the banks.
"While policy efforts are being adequately made to tackle this, we still have a long way to go before problems get fully resolved."
"We expect a pause on rates but given RBI has been significantly way off the inflation trajectory, we expect a softer tone in the upcoming policy, rather than the extreme hawkish rhetoric we've seen."
ANJALI VERMA, ECONOMIST, PHILLIPCAPITAL INDIA, MUMBAI
"It looks pretty tepid. GVA at 5.6 percent is weak, except for public administration and some bit on agriculture.
"Everything else is very, very weak. Manufacturing is pretty tepid, construction continues to remain very weak despite all the things the government has been saying. It's not looking good. The numbers are not at all good.
"This data is closer to the ground reality than the previous ones.
"Going ahead, I think one key factor will be the banking sector. That's dragging growth substantially. I am surprised why there is still no growth coming in construction, but I think with housing impetus it should happen gradually."
GAURAV DUA, HEAD OF RESEARCH, SHAREKHAN
"The current GDP rate is much closer to ground reality, and it is likely to soften the Reserve Bank's hawkish stance on growth. Hence, I do not expect a rate hike by the RBI anytime soon. Neither do I see a rate cut in the next few months.
"The implementation of GST (goods and services tax) could have a short-term impact, which will reflect on the overall full-year GDP growth, but that is because of the rollout of GST and not because of the tax slabs."
VARUN KHANDELWAL, MANAGING DIRECTOR, BULLERO CAPITAL
"Q4 GDP number was a bit disappointing.
"Since listed companies have reported a slowdown in their earnings for Q3 and Q4, I expect the data to be revised downwards.
"The most significant imbalance in India's growth story is the paucity of job creation. The demographic 'dividend' is slowly turning into a 'tax' as more young people enter the workforce, while the pace of job creation is meagre.
"It is critical that policy makers focus on a more equitable distribution of growth for the long-term socio-political stability of the country."
(Reporting by Samantha Kareen Nair, Tanvi Mehta, Arnab Paul, Abhirup Roy, and Suvashree Dey Choudhury; Compiled by Rafael Nam)
