Non-agriculture GDP growth to improve

COIMBATORE: Despite slowing economic growth, which advanced 5.3% for the quarter ending September, indicators show out that non-agriculture output, is likely to improve. This, coupled with the improvement in fixed investment growth, is a positive sign in an otherwise bleak environment, experts said.
Non-agriculture output would continue to improve, albeit slowly, observers said.“We think non-agriculture GDP growth has bottomed out. We expect a gradual pick up from the quarter ending December, driven by improvement in the industry and services segments,” analysts at Morgan Stanley India said. “Most high-frequency macro indicators are showing that growth trends are stabilizing at low levels.” The share of agriculture has been coming down and the sector accounts for only about 14% of the GDP now.
“We expect non-agriculture GDP growth to rise to around 6.4%-6.5% by March 2013,” Morgan Stanley said. Non-agriculture GDP growth decelerated marginally to 5.8% in July-September compared to 5.9% in the previous quarter.
Though overall growth has decelerated further to a 13-month low, the increase in gross fixed capital formation, indicative of the investment environment, bodes well for the economy, according to Bhupali Gursale, economist, Angel Broking. Fixed investment growth jumped to 4.1% year-on-year (y-o-y) for the quarter ending September compared to 0.7% in the previous quarter.
Indicators of consumption such as auto sales and consumer non-durables production have shown signs of stabilization in the past two months. “The growth deceleration in these consumption indicators may be behind, with the current trend stabilizing in a low range,” observers said.
While residential real estate activity picked up during the quarter ending September, order inflows of engineering and construction companies still remained weak for the period, analysts said.
However, the persistent weakness in the investment cycle has been keeping growth at low levels, experts said. The real private final consumption expenditure (PFCE) growth slowed down further to 3.7%, the lowest level in 30 quarters. “Given the global economic environment and the domestic policy hurdles, GDP growth is expected to remain subdued over the remaining quarters of this fiscal as well,” observers said.