India GDP Growth Unexpectedly Slows To 6.1% In Q1


The Indian economy advanced 6.1 percent year-on-year in the first quarter of 2017, slowing sharply from a 7 percent expansion in the previous period and well below market expectations of 7.1 percent. It is the lowest growth rate since the last quarter of 2014, due to a slowdown in consumer spending and a drop in investment, following the demonetization program started in November of 2016 that removed 86 percent of India's currency in circulation. In addition, the government changed the GDP base year for 2011-2012 from 2004-2005. The same change was made earlier for industrial production and wholesale prices indexes, with adjustments in the weights of the different industries. Considering the April 2016-March 2017 period, the economy advanced 7.1 percent, in line with the official estimate but below 8 percent in the previous year.

Year-on-year, private spending rose 7.3 percent, slowing from an 11.1 percent gain in Q4 2016 and gross fixed capital formation shrank 2 percent, following a 1.6 percent gain in Q4. In addition, exports (10.3 percent compared to 4 percent in Q4) rose less than imports (11.9 percent compared to 2.1 percent in Q4). In contrast, government expenditure jumped 31.9 percent, higher than 20.9 percent in Q4.

GDP estimates for Q1 already include revised data for industrial production and wholesale prices. The government changed the base year for those indicators earlier in May, aiming to align them and make them more representative. Manufacturing has now a higher weight in the industrial production index (77.6 percent form 75.5 percent) while electricity production accounts for less (8 percent from 10.3 percent).

The Gross Value Added, that is, GDP excluding taxes, increased 5.6 percent year-on-year in Q1 of 2017, lower than 6.7 percent in Q4 2016. Construction shrank 3.7 percent (+3.4 percent in Q4 2016) and slowdowns were recorded for trade, hotels, transport and communication (6.5 percent from 8.3 percent); financial and real estate activities (2.2 percent from 3.3 percent); manufacturing (5.3 percent from 8.2 percent); agriculture (5.2 percent from 6.9 percent) and utilities (6.1 percent from 7.4 percent). In contrast, mining and quarrying (6.4 percent from 1.9 percent) and public administration and defence (17 percent from 10.3 percent) rose faster.

Joana Taborda | joana.taborda@tradingeconomics.com
5/31/2017 1:54:06 PM