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A day ahead of release of the GDP data for the first quarter of the current financial year, an indicator to gauge GDP on monthly basis was launched today. Besides, ZyFin, a company who launched the indictor, estimated GDP growth to be 4.3% in the first quarter of 2013-14.
ZyFin’s estimates suggest that annual GDP growth in the first two quarters of this calendar year would be the seventh worst on record since the introduction of GDP quarterly data in 1996.
The silver lining, however, is on the inflation front.
ZyFin’s Monthly GDP Growth Indicator (MGGI), which tracks inflation on the basis of the GDP deflator, has witnessed a collapse in the sequential inflation from 6.7% in the fourth quarter of 2012-13 to 1.7% in the first quarter of 2013-14. According to its estimates, prices did not rise at all as inflation stood at zero per cent in June.
ZyFin estimates that inflation for the year would fall below 6% for the first time since the year 2007, excluding the crisis quarters of 2009.
Economist Surjit S Bhalla, Senior Advisor, ZyFin said, “ZyFin has developed a more advanced and immediate model for looking at the GDP by launching this monthly indicator and has thus enabled India to take a giant step away from its present state of data darkness.”
Comparing the GDP Growth Indicator data with the official GDP estimates, Bhalla mentioned, “The official quarterly year-on-year real and nominal estimates of GDP are helpful in deriving estimates for the implicit GDP deflator alone, but these figures don’t meet the purpose of informing investors about the economy’s present status. This is because three fourths of the figures have already been reported and contained in a year-on-year estimate.”
He said data reporting in developed economies such as the US is done only in sequential terms, they are first adjusted for seasonality. This makes comparisons more realistic and computation of sequential annualized growth rates possible.
In its calculation of GDP growth, there are four components --Agriculture (19 % weight), Manufacturing (15%), Construction (7%) and Services (59%).
All these sectors have contributed to this sequential low growth of 4.2%, with manufacturing being the biggest culprit. This sector registered negative growth of -0.6% in the second quarter. Construction was also a drag on growth, registering around 2.6% expansion, less than half its long run average of 7%. Service sector growth slowed down as well to 6.3%, well below its long run and expected average of 9%.
On the basis of convention method of calculating GDP growth, Finance Minister P Chidambaram had said economic expansion would be flat in the first quarter of 2013-14. It was 5.4% in the first quarter of 2012-13 and sub-five per cent in the third and fourth quarters.
