India GDP Growth At 4.7% In Q3, Weaker Than Revised Estimates For Q2

The Indian economy continued to remain sluggish in the three months ended December 2019. The pace of growth fell sharply in the third quarter when compared to the revised growth during the second quarter. It is estimated to slow further in the fourth quarter.

The data released on Friday saw significant revisions across the headline GDP and GVA growth readings, along with changes is estimates for different segments of the economy. The revisions follows a change in the national income data for FY19.

Gross domestic product grew by 4.7 percent in the third quarter of 2019-20, showed data released by the Central Statistics Office on Friday. This compares to a revised 5.1 percent growth in the second quarter. The first estimate had pegged second quarter growth at 4.5 percent. Based on the advance estimate of growth for FY2020, the GDP growth for the fourth quarter is implicitly estimated at 4.6 percent.

In gross value added terms, the economy grew at 4.5 percent in Q3, compared to a revised 4.8 percent in Q2.

A Bloomberg poll of 45 economists had estimated Q3 GDP growth at 4.7 percent. GVA was estimated at 4.4 percent according to 29 economists.

For FY20, GDP is estimated to grow by 5 percent as per the second advance estimates, in-line with the first advance estimate of 5 percent growth. The Indian economy grew 6.1 percent in FY19. The growth projected for the current financial year is the lowest in the current series starting 2011-12.

Nominal GDP grew by 7.7 percent in the third quarter. For the full year, it is estimated to grow by 7.5 percent.

The revisions to quarterly GDP growth- in part- statistical because of the revisions to FY19 growth, indicates that the economy will not bottom out before Q4FY20.

The steep revisions in growth have made it harder to guage the state of the economy.

The upward revisions in historical data present a complicated picture of growth, even though high frequency data is improving, said Rahul Bajoria, chief India economist at Barclays. We reckon a modest recovery continues to stay intact, and will gather some more steam in coming months despite mounting global risks, he added.

Expenditure Trends

Expenditure side data paints a picture of an economy where private investment has contracted for the last two quarters, while private consumption has remained below trend.

• Private consumption, reflected in private final consumption expenditure, rose by 5.86 percent in Q3.
• Investments, as measured by gross fixed capital formation, fell 5.16 percent in Q3.
• Government final consumption expenditure rose by 11.8 percent in Q3.

The sharp contraction in gross fixed capital formation in Q3 FY20 underscores the tepid investment sentiment, as well as the decline in capital spending by the state governments, a fallout of their fiscal constraints, said Nayar.

Sectoral Trends

Across different sectors, the agricultural sector and mining showed higher growth but manufacturing remained a drag on the economy.

• The agriculture sector grew at 3.5 percent in Q3, compared to 3.1 percent in Q2.
• Mining sector growth stood at 3.2 percent in Q3 compared to 0.2 percent in the previous quarter.
• Manufacturing contracted at 0.2 percent in Q3, compared to a contraction of 0.4 percent in Q2.
• Electricity and other public utilities contracted by 0.7 percent in Q3, as against 3.9 percent in Q2.
• Construction growth was at 0.3 percent in Q3 compared to 2.9 percent in Q2.
• Trade, hotel, transport, communication growth stood at 5.9 percent in Q3 compared to 5.8 in the previous quarter.
• The financial services sector grew at 7.3 percent compared to 7.1 percent in the previous quarter.
• The public administration segment, supported by government spending, grew at 9.7 percent in Q3 vs 10.1 percent in Q2.