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Charts & Analysis

Our GDP in Charts: Lack of Government Spending and Slowing Private Consumption Growth Show GDP at Marginally Weaker 7%


India’s GDP data came  in yesterday and it “seems” to be a weaker 7% compared to 7.5% in the march quarter. There’s two ways to look at it – the new calculation shows “Gross Value Added” which is actually UP from the previous quarter! (up to 7.1% from 6.1%)

GDP is just GVA plus the effect of indirect taxes, in my opinion. Given that it makes sense to consider indirect taxes and that anyway India’s going to look at the GDP (not GVA) as the headline number, we will grudgingly look at it too:


Nominal Growth (that is, the number that includes the impact of inflation) saw an uptick at 8.81% which is slightly better.

Sectors: Agri is Happier, but Services Show Sustained Drops


As you can see 1.9% as the Agriculture GDP growth which seems to be on a recovery path. Mining at 4% is also pretty good.

However Manufacturing at 7.2% is lower than the previous quarter, which is strange because input costs (steel, crude etc) should have fallen and prompted much more growth!

Construction has picked up apparently due to increased spending on roads and railways, but that doesn’t seem to reflect in expenditure yet.

The real disappointment is in the lower numbers we are seeing in the three of biggest sectors of the economy: Services and Trade. Financial services are down to 8.9% after lower credit growth. Personal services are languishing at 2.7% growth. Trade too, while at 12%, is lower than the previous quarter.

Government Spending Abysmal, Trade Goes for a Toss, Private Consumption Leads Growth


As you can see the government expenditure piece has been very very low. Just 1.2%. And that’s totally different from the picture we have been told – that the government has been spending. (It could of course be spending as part of “Investments” or what is called Fixed Capital Formation)

Consumption drives nearly everything (and it’s like 67% of our GDP) and it’s grown at 7.4%. That pretty much does the biggest impact.

Trade suckage continues, as imports and exports both drop. However in real terms, exports have dropped more than imports adn that is a concern!

Contributions: Nothing Else But What You and I are Buying


Investments and Private Consumption have been most of the GDP till date.

The Deflator: GDP shows inflation at 2.2%

Much of the GDP calculation uses the Wholesale Price Index even now, so the inflation shown by the GDP (by working it out from the Real and Nominal numbers) is at 2.2%.


Of course if inflation were higher – as measured by CPI – that means our real growth is much lower. (Nominal is what can be measured, real numbers are back-calculated based on other metrics, in most areas)

Our View

Markets seem to have hated it but remember they have been expecting very high growth. With corporate results so bad, we think even 7% is a good number, but obviously when you have markets running on steroids, they will react like crazy in either direction.

While this number is decent, the worrying factors are declines in private consumption growth, in an artifically low deflator, a very low growth through government spending (which is expected to drive our recovery) and finally, the massive drop in trade. At some point these will hurt GDP growth enormously if they don’t change.


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