• India’s economic growth decelerated to 4.7% in the December quarter 2013, in year ended terms, from 4.8% in the September quarter.
• The standout was the Services sector (particularly Financial services and Community services), which grew by 6.7%, followed by Agriculture at 3.6%.
• The Industry sector contracted by 1.2%, due to weakness in manufacturing and mining.
• On a more positive note, Business Surveys indicate a pickup in manufacturing activity during the March quarter, 2014.
• By expenditure category, net exports was the most significant contributor, reflecting both export growth and import compression. Consumption came second, but Business investment contracted, indicative of weak domestic demand.
• These results suggest that export-led sectors such as Information Technology and Pharmaceuticals are likely to have been better performing than their domestic-focussed counterparts.
• The strong trade performance has resulted in a sharp compression in the Current Account Deficit, with the December quarter Deficit contained at 0.9% of GDP, a historical low.
• India’s much improved external situation has led to a marked reduction in currency related volatility, ensuring continued Foreign Institutional Investor interest in Indian financial securities.
• There are stresses in parts of the banking system, particularly linked to lending in Infrastructure, Iron & Steel, Textiles and Aviation.
• Looking ahead, NAB Economics is forecasting growth of 5.2% in 2014, followed by a somewhat quicker 5.6% in 2015. The results of the upcoming elections, and its policy orientation will be crucial to future growth prospects.

For further analysis download the full report.

• India GDP (December Quarter) – March 2014 (PDF, 314KB)