Advance Estimates of National Income: 2012-13

Economics
The Central Statistical Office has released the advance estimates of national income for the current fiscal. As per these estimates Indias economic growth (GDP) in 2012-13 would be 5%, the lowest level since over a decade. This estimate is by far been the lowest of all the growth projections made by the RBI and the government for the current fiscal. It is also sharply lower than the 7.6% GDP estimate made in the Union Budget for 2012-13. Table 1 and 2 summarises the advance estimates of the Central Statistical Office

February 7, 2013

Table1: GDP at factor cost (2004-05) 2011-12 GDP (Rs. cr.) % growth Source: CSO Sector wise estimates: Table 2: sector wise- advanced estimates (% change) % Agriculture, forestry and fishing Mining and Quarrying Manufacturing Electricity, gas & water Supply Construction Trade, hotels, transport, and communication Financing, Insurance, real estate & business services Community, social & personal services Source: CSO 2011-12 (RE) 3.6 -0.6 2.7 2.7 5.6 7.0 11.7 6.0 2012-13 (AE) 1.8 0.4 1.9 1.9 5.9 5.2 8.6 6.8 52,43,582 6.2 2012-13 55,03,476 5.0

GDP growth is estimated to decline 1.2% from that in the last fiscal to 5% in 2012-13. This decline for the year as a whole indicates that the economic growth has seen a larger slowdown in the second half of the fiscal as the first half of 2012-13 recorded a growth of 5.4%. The growth in agriculture and allied activities is projected to be 1.8%, lower than the 3.6% of the previous fiscal. This decline in agri-performance can be attributed to the adverse impact of the unfavourable weather conditions witnessed in the country this fiscal. Manufacturing growth too is expected to fall from 2.7% to 1.9%.The manufacturing sector output has been lack lustre for most of the current fiscal up till now. For nearly 6 out of the 8 months for which data is currently available, manufacturing output has been negative. 1

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The services sector too has seen a sharp decline this year, contrary to expectations. This sector, including finance, insurance, real estate & business services is projected to see a sharp decline of 3.1% this financial year to 8.6%. This decline in the services sector is a significant let down for the countrys economic growth as this segment has been the major contributor to the countrys economy in recent years, recording near continuous growth rates over 10%. The decline in this sector can be in large part being attributed to the overall slowdown in the global economy which has restricted the demand for services. Community, social and personal services have been estimated to register marginally higher growth from 6% last fiscal to 6.8% this year. This number may come down as the finance minister has indicated that there would be expenditure cuts across the board to contain its fiscal deficit. Mining and quarrying is expected to register a growth of 0.4%. This growth however is not indicative of improvements in this sector as this sector has experienced negative growth of 0.6% over the last years.

Consumption Trend: Table 3: Consumption Trend (as % of GDP) Industry Private Final Consumption Expenditure Government Final Consumption Expenditure Gross Fixed Capital Formation Change in Stocks Valuables Source: CSO FY12 56.3 11.6 30.6 2.1 2.7 FY13 56.9 11.8 29.9 3.0 2.4

Private Final Consumption Expenditure is estimated at 56.9% of GDP in FY13 higher than 56.3% in FY12 while Government Expenditure to GDP increased marginally to 11.8% from 11.6% in FY12. Gross fixed capital formation has been estimated lower at 29.9% as against 30.6% in the previous year, indicating lower investment activities. Change is stock is expected to increase to 3% of GDP from 2.1% in FY12, indicating higher inventory levels, indicative of lower demand. Also, the valuables are observed to experience a decline from 2.7% to 2.4%. This is largely reflective of the probable decline in valuable such as gold.
Our view Structural bottlenecks, policy inaction, high interest rates, declining exports, lacklustre agricultural growth, low non-food credit growth, declining industrial growth has led to the systematic decline in the overall economic growth of the country in the current year. Despite the government initiating a series of reforms since September12, the various economic indicators that have been released since are indicative of the continuing deterioration in the economy. To revive growth and promote investments in the coming fiscal, the government would be pressured to present in its upcoming budget measures that would help overall growth.

National Income Estimates: 2012-13

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We expect growth to revive gradually going into the next fiscal and our preliminary estimate for GDP growth is 6% for 2013-14. This growth would however be contingent on various factors such fiscal stimulus from the government along with the necessary policy reforms, lower interest rates, improvement in global economic conditions and revival in industry among others.

Contact: Kavita Chacko Economist kavita.chacko@careratings.com 91-022-67543646 Jyoti Wadhwani Associate Economist jyoti.wadhwani@careratings.com 91-022-67543407 Anuja Jaripatke Shah Associate Economist anuja.jaripatke@careratings.com 91-022-67543552

Disclaimer This report is prepared by the Economics Division of Credit Analysis & Research Limited [CARE]. CARE has taken utmost care to ensure accuracy and objectivity while developing this report based on information available in public domain. However, neither the accuracy nor completeness of information contained in this report is guaranteed. CARE is not responsible for any errors or omissions in analysis/inferences/views or for results obtained from the use of information contained in this report and especially states that CARE (including all divisions) has no financial liability whatsoever to the user of this report.

National Income Estimates: 2012-13