A superior Q4 performance, surpassing expectations, enabled the economy to post 7.2 per cent growth in 2015-16, against 7.1 per cent in the previous fiscal. Helped by other developments, a decent increase of 2.3 per cent in agriculture (in view of poor winter rainfall) and 6.4 per cent increase in  public administration, defence and other services, the Q4 registered 7.4 per cent increase in GVA at factor cost, against 6.2 per cent increase a year ago and 6.9 per cent in the preceding quarter. The stronger 7.9 per cent increase in broader GDP at market, twice of 4.4 per cent in Q4 a year ago was more striking, putting India in the front row of fastest growing economies in the world. This adds extra significance as China, the powerhouse in the world markets so far has been slowing in recent years, with growth rates falling behind those of India.

But, as we have been underling in our Quarterly Projects Surveys, investment as measured by gross fixed capital formation (investment) has been sliding even as supply side (GVA at factor cost) seems to be maintaining its tempo. Thus, the growth in GFCF degenerated into a negative 1.9 per cent in Q4, from 9.7 per cent positive growth in Q2 and a paltry 1.2 per cent in Q3.  Even for the fiscal 2016, the 3.9 per cent increase in GFCF was one full percentage point lower than 4.9 per cent in the preceding fiscal. Obviously, the push to project investment by the Modi government during FY15 (underlined in the acceleration from 3 per cent in FY14), was found losing steam a bit in FY16.

GVA grows 7.2 per cent

The sectors which registered growth rate of over 7.0 per cent are ‘financial, real estate and professional services’ (10.3 percent), manufacturing (9.3 per cent), ‘trade, hotels, transport, communication and services related to broadcasting’ (9.0 per cent),  and ‘mining and quarrying’ (7.4 per cent).  The growth in the ‘agriculture, forestry and fishing’, ‘construction’, ‘electricity, gas, water supply & other utility services’, ‘public administration, defence  and other services’ is estimated to be 1.2 per  cent, 3.9 per cent, 6.6 per cent and 6.6 per cent respectively.

Intra-quarters, even as all quarters fared relatively well, fourth quarter was a bit superior with 7.4 per cent growth.

GDP grows 7.6 per cent

Like GVA, the fourth quarter fared best in broader GDP which is built from expenditure side, growing at 7.9 per cent,  against  7.2 per cent in Q3, and 4.4 per cent a year ago,

Private final consumption expenditure (PFCE) increased 7.4 per cent (6.2 per cent), government final consumption expenditure (GFCE) 2.2 per cent (12.8 per cent), GFCF 3.9 per cent (4.9 per cent) and valuables 3 per cent (15.4 per cent).Net imports shot up 36 per cent (-12 per cent).  Direct, indirect taxes expanded, subsidies declined 7 per cent.

Investment slows, intensity erodes

GFCF declined 1.9 per cent in Q4 of 2015-16, which was the first declined over past eight quarters. Investment intensity of the economy, as measured by the ratio of GFCF to GDP at current prices declined to 29.3 per cent, from 30.8 per cent in FY 2015 and 31.6 per cent in FY 14. Signifying all is not well on investment front, real incomes in construction industry expanded 3.9 per cent, against 4.4 per cent in FY15. In fact, over medium term, the average growth rate of around 3.6-3.9 per cent  in GFCF/Construction  is less than a half of that in manufacturing and GDP.

The total size of the economy as measured by GDP at market prices and current prices has been assessed at Rs 135.76 trillion, or $2.08 trillion. Per capita income works out to Rs 105815 and per capita PFCE Rs 62958.

Key Growth Indicators (YoY increase in %)
GFCF Construction Mfg GVA
2012-13 -0.3 -4.3 6.2 4.9
Q1 -6.0 -2.9 3.0 5.0
Q2 -2.9 -7.2 11.2 6.2
Q3 0.7 -5.8 7.1 4.4
Q4 6.5 -1.7 4.2 4.1
2013-14 3.0 2.5 5.3 6.8
Q1 2.3 1.5 7.2 7.2
Q2 6.3 3.5 3.8 7.5
Q3 5.3 3.8 5.9 6.6
Q4 -1.4 1.2 4.4 5.3
2014-15 4.9 4.4 5.5 7.1
Q1 7.9 5 7.9 7.4
Q2 5.8 5.3 5.8 8.1
Q3 1.7 4.9 1.7 6.7
Q4 4.1 2.6 6.6 6.2
2015-16 3.9 3.9 9.3 7.2
Q1 7.1 5.6 7.3 7.2
Q2 9.7 0.8 9.2 7.3
Q3 1.2 4.6 11.5 6.9
Q4 -1.9 4.5 9.3 7.4

 

Provisional Estimates of GVA at Basic Price by Economic Activity
Industry 2013-14 2014-15 2015-16 % change over prev year
(2ndRE (NS)) (1st RE) (PE) 2014-15 2015-16
Agriculture, forestry & fishing 1,588 1,584 1,604 -0.2 1.2
Mining & quarrying 267 296 318 10.8 7.4
Manufacturing 1,580 1,667 1,822 5.5 9.3
Electricity, gas, water supply & other utility services 201 217 231 8 6.6
Construction 818 855 888 4.4 3.9
Trade,hotels,transport,communication and services related to broadcasting 1,670 1,834 1,998 9.8 9
Financial, real estate & professional services 1,844 2,039 2,249 10.6 10.3
Public Administration, defence and other services 1,116 1,235 1,317 10.7 6.6
GVA at Basic Price 9,084 9,727 10,427 7.1 7.2
By major sectors
Agriculture, forestry & fishing 1,588 1,584 1,604 -0.2 1.2
Industry 2,866 3,035 3,259 5.9 7.4
Services 4,630 5,108 5,564 10.3 8.9

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