Services would hold a key for India's GDP numbers for the second quarter of this fiscal to be released tomorrow.
This is not only because the tertiary sector is the largest contributor at over 60% of India's economy, but also due to the fact that industry has only partially recovered in the second quarter at an aggregate level. However, the secondary sector's output contracted in two months--July and September-- of the three months of the second quarter. It had fallen in as many months in the first quarter as well.
Besides, agriculture may not give much of the relief even as monsoon had recovered in August and September, economists said.
India's economy grew 5.5% in the first quarter of this fiscal against 8% in the corresponding period of last fiscal. That time, industry (without construction) grew just 0.8% against 6.5% in April-June of 2011-12 and services by 7.4% against 9.3%. Agriculture grew 2.9% against 3.7%.
India’s economy grew 5.3% in the fourth quarter of 2011-12.
"If industry grows sub-3% and agriculture also grows sub-3% in the second quarter, the burden to give a boost to GDP will fall on services sector," said Anis Chakravarty, senior director, Deloitte in India.
However, he also added that services also did not perform too well in the first quarter. It fell below 8% for the first time after remaining above that rate for quite a few quarters, he added.
But, then GDP also grew 6.7% in the second quarter of last fiscal and that favourable impact will come on the data to be released tomorrow.
If one sees index of industrial production (IIP), industrial output contracted 0.28% in the first quarter. The difference between GDP data on industry and IIP data is because of bit wider coverage of some smaller units in National Accounts which are not taken into account in the factory output data.
Now, IIP data for the second quarter shows that industrial growth turned positive in the second quarter at 0.55%. However, it was all because of 2.29% growth in August, since July and September figures were in negative.
Manufacturing, the dominating sector in IIP, contracted 0.84% in the first quarter and grew by 0.15% in the subsequent three months of this fiscal.
There is no official figure for services in the second quarter. However, if one sees HSBC purchasing managers' index (PMI), manufacturing growth averaged 54.9 points in the first quarter of this fiscal and fell to 52.8 in the second quarter. However, services expanded by 53.9 points in April-June period, but increased to 55 points in July-August.
PMI segregates expansion from contraction at 50 points. If PMI matches official data, the second quarter GDP might also get a boost from services sectors like in the first quarter. However, PMI is just a survey of some 350-500 private sector firms. Besides, it is month-on-month calculation, against GDP which is year-on-year math.