In a shocker, growth in Q4FY12 dropped to nine year low of 5.3% YoY, lower than anyone could have gauged. On hindsight, Analysts estimate at 6.1% YoY appeared rather optimistic.
Services sector that has otherwise been the key growth driver clocked 8.9% YoY growth in FY12 compared to 9.3% YoY in FY11. If the services sector fails to recover in 2012, growth prospects could get even more clouded.
Industrial growth slumped by almost half to 3.4% YoY from 7.6% earlier mainly due to contraction in monetary policy. Even the farm sector posted an unimpressive growth of 1.7% YoY in Q3FY12, manufacturing sector contracted by 0.3% YoY pulling the overall industrial growth down to 1.9% YoY.
Within the industrial economy, every sector is in poor shape including manufacturing electricity (-0.3% viz. 0.6 %), gas & water supply (4.9% viz. 9.0% and construction (4.8% viz. 6.6%).
Clearly, the trough is not visible in the near-time and growth in the next few quarters could follow a similar trajectory as possibility of a sudden reversal in the policy environment remains low.
Consensus estimated FY13 GDP at 6.8% (which is already beaten) looks optimistic for now. Though the base could support the growth to some extent, it is difficult to time the revival in investment cycle without which next leg of growth revival is improbable. We maintain our stance of no policy rate cut going forward in the rest of CY2012.
The Government headed by Dr Singh and Mr Pranab are in denial mode and keep making empty promises of Lower Inflation and Higher GDP Growth, delivering exactly the opposite. They probably have forgotten the Economics definitions of these terms and need to retire as brains filled solving Corruption Scandals of fellow Congressmen.
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