Real GDP growth seen at 4.5% for 3QFY2013: Angel Broking
Angel Broking has come out with its report GDP growth. According to the research firm, the intended fiscal adjustment is expected to impact real GDP growth owing to the likely moderation in Community, Social and Personal services.
March 04, 2013 / 14:03 IST
Angel Broking has come out with its report GDP growth. According to the research firm, the intended fiscal adjustment is expected to impact real GDP growth owing to the likely moderation in Community, Social and Personal services.
Real GDP growth for 3QFY2013 came in at 4.5% yoy, decelerating from 5.3% yoy growth in 2QFY2013 and 6.0% yoy growth in the corresponding quarter of the previous year. The moderation can be largely attributed to slower pace of growth in the services sector.Trends in economic growth
Agriculture, forestry and fishing continued to report subdued growth of 1.1% yoy as against 1.2% yoy in 2QFY2013 and 4.1% yoy in 3QFY2012, impacted by decline in production in the kharif season.The Industrial sector slightly rebounded to 3.3% during the quarter from 2.7% yoy in 2QFY2013 and 2.6% in the corresponding quarter of the previous year. The Manufacturing sector alone contributes more than 50% to industrial growth and it reported a 2.5% yoy growth, higher than the marginal 0.8% yoy growth in the previous quarter and 0.7% yoy growth in the corresponding quarter of the previous year. The Services sector, having the highest weightage in GDP, moderated to 6.1% yoy as compared to a growth of 7.2% yoy in the previous quarter and 8.3% yoy in 3QFY2012, reflecting a broad-based slowdown amongst all its components.Monetary policy to support growth, going ahead
The Union Budget 2013-14 has reined in the fiscal deficit for FY2013 at a lower-than-expected level of 5.2% of GDP. Strengthening its fiscal consolidation efforts, the FY2014 fiscal deficit is budgeted at 4.8% of GDP. We expect the intended fiscal adjustment to impact real GDP growth owing to the likely moderation in Community, Social and Personal services. Growth in this component has already decelerated for the second consecutive quarter to 5.4% in 3QFY2013.Headline WPI inflation is on the downward trajectory but the Reserve Bank of India (RBI) has time and again indicated that heightened twin deficits, ie fiscal and current account deficits, are key factors limiting a more accommodative stance. In light of positive steps taken by the government towards fiscal consolidation, we expect monetary policy stance to be more growth-supportive. But we do not expect an aggressive policy easing stance either. We expect the RBI to cut the repo rate reasonably by 75bp for the rest of CY2013 since risks emanating from current account deficit have not been addressed yet. In addition, we believe that release of suppressed inflation in the economy is also likely to pose an upside risk to inflation going ahead.Expect GDP growth at 5.7% in FY2014
As per the CSO’s advance estimates, real GDP growth in FY2013 is likely to come in at a decade-low 5.0%, ie lower than the RBI’s GDP growth assessment of 5.5% for FY2013. This adds to the disappointment of downward revision in growth for FY2012 from 6.5% to 6.2%. We expect real GDP growth for FY2014 to gradually recover to 5.7%. The Economic Survey of India is more optimistic and pegs growth to recover in the range of 6.1% to 6.7% in FY2014. We believe that a recovery in growth crucially rests on drivers such as incentivizing investments, a pick-up in consumption and exports, removing structural supply-side bottlenecks etc to improve the economic outlook.Shares held by Insurance Companies Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.To read the full report click on the attachment 
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