India’s first quarter GDP grew by 8.8% q-o-q compared to the previous quarter’s 8.6%. The growth was nearly a three year high and was almost in line with the market expectations.

  • The impressive figures were due to robust growth in the manufacturing and farm output which recorded decent growth-rates
  • According to the deputy chairman of the Planning Commission, Montek Singh Ahluwalia and other economists, the growth momentum is building up and the FY11 growth can be more than 8.5%
  • He also indicated that he seeks calibrated rate-hike in FY11 aiming to seek balance and growth together and not hampering one for another
  • The data underscores continued growth momentum in Asia’s third-largest economy amid growing uncertainty over global recovery
  • The RBI is widely expected to raise interest-rates in the coming monetary policy as the strong growth figures provides it with the opportunity to concentrate more on curbing the double-digit growth in inflation. The central bank has already raised interest rates four times since mid-March to stamp down inflationary pressures
  • Nifty pulled up from the steep intra-day slide and India’s 10 year benchmark bond yield fell 2 basis points to 7.95% after the release of the figure
  • Manufacturing sector grew by 12.4% compared to 16.3% on a q-o-q basis due to buoyant consumer demand which pushed up car sales and made factories produce to their optimum capacity. The sector grew at 3.4% for the corresponding period in the last year and is expected to slow down in the coming quarters due to capacity constraints
  • Agricultural growth rate stood at 2.8% and is expected to see robust growth on good monsoon rains, which is likely to further boost consumer demand by lifting rural income
  • The industry sector grew by 10.3% compared to the last quarter’s growth of 13.3% on an overall basis while the mining sector grew by 8.9% compared to the last quarter’s growth of 14%
  • Among services, financial, insurance and real estate services expanded by just 8%, against a growth rate of 11.8% in the year-ago quarter, while community social and personal services growth slowed down to 6.% , against 7.6% a year ago
  • Construction sector grew by 7.5% compared to the last quarter’s 8.7% while trade, hotels and communication services rose by 12.2%

 

Author: Rahul Sonthalia, Research Head, Kredent