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See FY14 GDP growth at 6.4%: Goldman Sachs

The reading supports our view of a gradual uptick in activity, becoming more pronounced in 2H2013

April 12, 2013 7:22 IST | India Infoline News Service

Bottom line: February IIP surprised on the upside, coming in 190bp above consensus expectations. Stronger-than-expected capital goods growth drove the increase. The reading supports our view of a gradual uptick in activity, becoming more pronounced in 2H2013. We maintain our above-consensus view of FY14 GDP growth at 6.4% yoy.


Key numbers:

  • February IP growth: +0.6% yoy vs. GS: -0.3% yoy, Bloomberg Consensus: -1.3% yoy.

  • Capital Goods: +9.5 yoy, Consumer Goods: +0.5% yoy.

Asia-MAP score: 9 (3, 3)

  • 3 out of 5 for relevance to GDP.

  • 3 on a scale of -5 to +5 for surprise relative to consensus.


Exhibit 1: India's Index of Industrial Production



Source: MiOSPI, GS Global ECS Research.


India's February IIP grew 0.6% yoy, versus consensus expectations of a 1.3% decline yoy. Sequentially as well, IIP rose 1.9% qoq s.a., continuing the expansion from the last quarter of 2012.


The upside surprise was mainly led by an uptick in the capital goods segment, which jumped 9.5% yoy. Sequential momentum was also strong in the capital goods index. 


Consumer goods slowed, led by a decline in consumer durables and in line with declines in other coincident indicators such as car sales. However, consumer non-durables grew 2.9% yoy.


While activity remains weak, the better-than-expected reading today supports our view of a gradual uptick in activity and the appearance of "green shoots" in the data (see Activity bottoming out, but cyclical recovery to take somewhat longer-revising our GDP forecasts, March 8, 2013). We continue to expect a cyclical recovery in activity, becoming more pronounced in 2H2013. We maintain above-consensus view of FY14 GDP forecast at 6.4% yoy.


Excerpts from the report can be attributed to Tushar Poddar, Managing Director & Chief India Economist, Goldman Sachs.


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