India GDP (September Quarter) – December 2013

Indian growth accelerated to 4.8%, in year ended terms, in the September Quarter, up from 4.4% in the June quarter. An improvement in the agricultural sector (up to 4.6% from 2.7%), due to a favourable monsoon season, helped drive the improved outcome.

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  • Indian growth accelerated to 4.8%, in year ended terms, in the September Quarter, up from 4.4% in the June quarter.
  • An improvement in the agricultural sector (up to 4.6% from 2.7%), due to a favourable monsoon season, helped drive the improved outcome. The industry sector moved into positive territory (1.6% from -0.9%) owing to a surge in electricity production. Services decelerated (5.8% c.f. 6.2%) on account of a slowdown in the government-supported Community services, although Financial services expanded.
  • By expenditure, Net Exports was the standout, and contributed 70% to growth. Both consumption (mainly private) and investments contributed positively, albeit to a much lesser extent than Net Exports.
  • There was a sharp increase in exports of refined fuel products; conversely, gold imports fell steeply due to Government and RBI restrictions.
  • An improvement in the trade balance and improved service sector receipts led to the Current Account Deficit contracting to a low of -1.2% of GDP. When combined with the USD34Bn of inflows stemming from the RBI’s Concessional Swap facilities for FCNR (Foreign Currency Non Resident) deposits and Banks’ Overseas Borrowings, external vulnerabilities have lessened considerably.
  • Reflecting improved confidence in the External situation, the RBI has also withdrawn the Swap window offered to Oil Marketing companies, although it has left open the possibility of resuming this facility in exceptional circumstances.
  • NAB Economics has raised its growth forecasts following the September Quarter GDP result. We are now forecasting a 4.7% expansion in 2013, followed by a stronger 5.1% outcome in 2014.
  • Improved agricultural production and net exports should be supportive of growth, whilst tight fiscal and monetary policy would provide headwinds.

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