FY12 will be a y year of consolidation Quarterly Real GDP Growth (%yoy)
2Q FY12 Real GDP grew at 6.9% yoy (7.7% in 1Q FY12), slowest growth in last nine quarters. GDP by activity showed that growth was driven by strong performance in Services that grew at 9.3% 9 3% yoy. yoy Industry slowed to 3.2%, driven down by disappointing mining and manufacturing growth. GDP by expenditure (demand side) raised concern as Private Consumption moderated and Fixed Capital Formation (that indicates investments)) contracted. But net exports p contributed positively to growth.
Going forward, Agriculture growth may slow to around 3% even with good monsoon on high base. Industry will remain under pressure on higher interest rate, high inflation, and tight liquidity From expenditure side, both consumption and investment may face lagged effect of the monetary tightening. Government consumption might not go down as much as expected before as Government fails to adhere to tthe e budgeted fiscal sca de deficit. c t Net et e exports po ts had ad co contributed t buted pos positively t e y to G GDP. This s may ay not ot hold o d ttrue ue for o FY12 as exports decelerate. GDP growth in FY12 to be around 7% yoy from 8.5% in FY11. Tight monetary policy may also keep GDP growth in FY13 subdued However, medium term prospects remain positive due to • Robust expansion in private services g consumption, p , both rural and urban • Strong • Acceleration in export demand • Strong investment pipeline with emphasis on infrastructure
Source : CMIE, CSO, RMF Research
macro economic environment