At 7%, Q1 GDP growth below Street estimates

The financial year has started on a tepid note. First came weak corporate earnings, and then a negative surprise in the form of gross domestic product (GDP) data. According to the Central Statistics Office, the economy is estimated to have grown seven per cent in the June quarter compared to the last year.

On the face of it, all segments of the economy have shown growth over the comparable period last year. Despite deficient rains, agriculture has grown 1.9 per cent year-on-year, while mining and quarrying has grown four per cent (y-o-y). Manufacturing has grown 7.2 per cent, construction 6.9 per cent and trade, hotel and transport 12.8 per cent Stock Market Trading Tips

It would appear that the economy is in the midst of a strong recovery. But that does not seem to be the case. Private final consumption and government expenditure are not showing any significant uptick.

Economists believe the economy is still a couple of quarters away from any meaningful recovery. Economic growth has slumped to 7 per cent from 7.5 per cent in the fourth quarter of the last financial year. Siddhartha Sanyal, chief economist at Barclays, says, "In terms of overall assessment, a seven per cent handle is not a surprise. In terms of momentum, the economy is recovering to an extent, while it might not be correct to factor in a sharp uptick in growth just yet. We clearly see room for support from both monetary policy and fiscal spending Himanshu Tiwari Astrologer Blog

Economists are flummoxed that the GDP growth of seven per cent remains softer than the GVA (gross value added) figure of 7.1 per cent. Adds Sanyal: "That the GDP growth rate remains softer than GVA growth is a surprise."

The economy is not showing a strong pick-up in private consumption, either. Given that India is a consumption-driven economy, a pick-up in private final consumption is a sure enough indication of an economic revival. But this is not yet the case with private consumption accounting for 58.7 per cent of the economy. Private consumption continues to remain less than 60 per cent of the GDP, suggesting that aggregate demand conditions continue to be weak. Explains Dhananjay Sinha of Emkay Global, "Recovery looks fragile at this point. The trend of earnings downgrades over the last six years continues. Further GDP downgrades are likely after Q1 numbers." A rate cut by the central bank could give the economy a boost Indian stock market astrology prediction