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India Q1 GDP growth rate slows to 7% vs 7.5% QoQ

The country’s first quarter (April-June) gross domestic product in fiscal year 2015-16 slipped from 7.5 percent in the previous quarter (January-March) to 7 percent. A poll of economists had forecast growth to come in at 7.5 percent.

The GDP growth data is calculated under the new methodology (GDP at market prices) that the government’s statistics department moved to last year.

Economists said the number was disappointing but said further detail was needed in order to understand the data better.

Among key components, growth in agriculture, manufacturing, construction and mining sectors stood at 1.9 percent, 7.2 percent, 6.9 percent and 4 percent, respectively, year-on-year.

There was disappointment in public administration, which grew 2.7 percent while electricity growth slowed to 3.2 percent.

The GDP at gross value added (GVA), a key measure that measures growth by expenditure, stood at 7.1 percent versus 7.4 percent YoY. The GVA is calculated by adding indirect taxes and subtracting subsidies.

“The GDP at 7 percent is disappointing,” JPMorgan Economist Sajjid Chinoy told CNBC-TV18. “Weakness in public administration was likely behind the slowing growth”.

He, however, said that he expected public administration to perk up and boost GDP going forward.

Yes Bank Chief Economist Shubhda Rao said that GDP growth was weak given the momentum that should have existed.

“Going forward, we need to see whether the capex that the government has made will translate into higher numbers, which we believe they would,” she said. “For the full year, we expect full year GDP growth to come in at 7.8 percent.”

SBI Chief Economist Soumya Kanti-Ghosh, however, pointed out that with nominal GDP (real growth plus inflation) coming at 8.8 percent, it would put pressure on the government’s fiscal deficit target — the government had outlined nominal growth of 11.5 percent for the year.

The markets would see the headline GDP number as a disappointment, Standard Chartered Head of Financial Markets Ananth Narayanan said.

“But the data is not entirely negative. The overall message the market would take away would is that there are green shoots in the economy but the recovery is very slow.”

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