 "Silver lining: India's GDP and size of economy expand in Q1, FY'14")
The currency movements have come in for sharp criticism, but these yielded a pleasant surprise to India's GDP in dollar terms in the first quarter of the current financial year. The rupee value against the dollar has pushed India's gross domestic product (GDP) growth as well as size of India's economy, at least in the first quarter of 2013-14 year-on-year as well as sequentially.
GDP in dollar terms rose 0.85% in the first quarter of 2013-14 against massive 12.8% contraction in the corresponding period of 2012-13. The GDP had fallen 2.84% in the fourth quarter of 2012-13. India's GDP grew to $245.51 billion from $243.42 billion.
Besides, the size of India's GDP (at current prices and including indirect taxes) expanded 4.5% in the first quarter of the current financial year against contraction of 7.3% in Q1, 2012-13. The size had risen 2.7% in the fourth quarter of 2012-13. The GDP's size grew to $448.17 billion in the first quarter of 2013-14 from $428.78 billion in the same period previous year.
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The push to GDP in dollar terms came from the exchange rate difference in these periods. The rupee depreciated just 3.44% in the first quarter of 2013-14 year-on-year, while it fell a whopping 20% in the first quarter of 2012-13 year-on-year. A dollar fetched Rs 55.85 in April-June, 2013-14
on an average against Rs 53.99 in same period last year and Rs 44.67 in Q1 of 2011-12..
In rupee term, the GDP grew a four-year low of 4.4% much below the expectations of various analysts and policy makers. The growth in the previous quarter was 4.8% and 5.4% in the first quarter of 2012-13.
The size of GDP expanded 8.1% in rupee terms to Rs 25.03 lakh crore in first quarter of 2013-14 from Rs 23.15 lakh crore in same period last year.
Size of GDP in dollar terms assumes importance when one calculates current account deficit (CAD). Both CAD and GDP are calculated in dollar terms for this purpose. Exchange rate movements some times have a weird impact on these numbers. For example, CAD at $16.4 billion was lower in Q1 of 2012-13 than the corresponding quarter of the previous year ($ 17.4 billion). However, as a proportion to GDP, CAD stood at 3.9% as compared with 3.8% in the corresponding quarter of previous year.