Mon Feb 09 06:00:00 CST 2015

Consensus Actual Previous Revised
Change Y/Y 5.5% 7.5% 5.3% 8.2%

Annual growth last quarter was a much stronger than expected 7.5 percent but even this was well short of the third quarter rate, revised up nearly 3 percentage points to a whopping 8.2 percent. The new figures reflect a switch in the measurement of total output from factor cost to market prices as well as the adoption of a new base year (FY2011/12).

All of the major sectors registered solid yearly gains including a 13.7 percent rise in financial, real estate and professional services, a 9.6 percent advance in utilities and an 8.4 percent increase in trade, hotels, transport, communications and broadcasting services. Manufacturing output was up 6.8 percent, mining and quarrying 2.3 percent and agriculture, forestry and fishing, 1.1 percent. Public sector output grew 9.0 percent.

Many analysts have questioned the reliability of the new statistics which saw growth in FY2013/14, revised up from 4.7 percent to fully 6.9 percent, paint a much more bullish picture of economic activity than originally indicated. The previously reported 5.5 percent expansion in total output in the first half of the current fiscal year is now put at 7.9 percent.

Crucially for the interest rate outlook, the RBI has also expressed some reservations about the accuracy of the new figures. As such, the new-found buoyancy of the Indian economy need not necessarily preclude additional monetary easing over coming months. That said it may mean that the upcoming inflation data will have to be especially friendly if the central bank is to pull the trigger on rates again.

Meantime, international investors will note that Indian economic growth has overtaken China (7.3 percent last quarter).

Gross Domestic Product (GDP) is the broadest measure of aggregate economic activity and encompasses every sector of the economy. The GDP report paints an image of the overall economy and tells investors about important trends within the big picture.

GDP is the all inclusive measure of economic activity. Investors need to closely track the economy because it usually dictates how investments will perform. Stock market investors like to see healthy economic growth because robust business activity translates to higher corporate profits. The GDP report paints an image of the overall economy and tells investors about important trends within the big picture.

Each financial market reacts differently to GDP data because of their focus. For example, equity market participants cheer healthy economic growth because it improves the corporate profit outlook while weak growth generally means anemic earnings. Equities generally drop on disappointing growth and climb on good growth prospects. Bond or fixed income markets are contrarians. They prefer weak growth so that there is less of a chance of higher central bank interest rates and inflation. When GDP growth is poor or negative it indicates anemic or negative economic activity. Bond prices will rise and interest rates will fall. When growth is positive and good, interest rates will be higher and bond prices lower. Currency traders prefer healthy growth and higher interest rates. Both lead to increased demand for a local currency. However, inflationary pressures put pressure on a currency regardless of growth.

The quarterly national accounts series are not published in seasonally adjusted form. The publications contain growth rates in comparison with the corresponding quarter of the previous year. The Quarterly Gross Domestic Product (QGDP) estimates are now released by the CSO on the last working day after two months of the end of a quarter. Data are for the prior quarter. Data released on February 28, 2013 are for the fourth quarter 2012.

To the extent that it was feasible, the accounts implemented the recommendations of the System of National Accounts (SNA), 1993 and 2008 prepared under the auspices of the Inter Secretariat Working Group on National Accounts comprising of the European Communities (EUROSTAT), International Monetary Fund (IMF), Organisation for Economic Cooperation and Development (OECD) United Nations and the World Bank.