July GDP growth at 4.4%: ZyFin

The firm says that good monsoon will lead to a lower inflation in the coming months

Giving a glimmer of hope to the struggling economy, India's Gross Domestic Product (GDP) grew at 4.4 per cent in July year-on-year, compared to 2.9 per cent in the previous month, according to the first estimates by ZyFin Research, a research and analytics company.

ZyFin estimates GDP growth and inflation on year-on-year basis (comparing the present month with the same month last year) and also on month-on-month basis (comparing present month with the previous month the same year).

In July, the economy grew 4.6 per cent compared to June this year, that is on a month-on-month (MoM) basis. This sequential growth in June was three per cent.

“After declining for five straight months, the MoM growth estimates are pointing towards a moderate improvement in growth for July 2013,” said Surjit S Bhalla, Senior Advisor at ZyFin Research. “However, the GDP average growth of 4.3 percent for the first four months of this fiscal year as estimated by ZyFin Research still suggests a struggling economy.”

The GDP deflator, a measure of inflation, was estimated to be 5.8 per cent in July against 4.9 per cent in June. This falls in line with the official estimates for that month. However, just as retail or wholesale inflation are computed on specific basket of goods, the GDP deflator is calculated upon goods that vary according to consumption in that particular period of time in which the data is computed.

However, the firm said that a good monsoon would lead to a lower inflation in the coming months. Debopam Chaudhuri, vice-president of research at ZyFin, said, “With a good monsoon coupled with early indications of rapid growth in the agriculture sector, we expect inflation to remain below Reserve Bank of India’s comfort level of under 5.0 per cent for the Wholesale Price Index.”

According to ZyFin estimates, agriculture grew by 3.2 per cent, manufacturing by 1.1 per cent and services rose five per cent in July as compared to the same month last year. The construction segment expanded marginally by 0.2 per cent in this month against July 2012.

This showed that the growth in agriculture has not yet picked up according to the expectations of various policymakers. The Prime Minister's Economic Advisory Council (PMEAC) had pegged agriculture to grow by 4.8 per cent in 2013-14 against 1.9 per cent a year ago. They also said that this would take the GDP growth, higher than previous year, to 5.3 per cent

“The economy needs to accelerate to an average growth rate of 6.0 percent for the rest of the fiscal year to meet the 5.3 percent GDP growth estimate of the PMEAC, which appears to be difficult,” said Bhalla.

In the first quarter, GDP grew at 4.4 per cent according to official estimates. ZyFin had predicted GDP to grow 4.3 per cent in that phase. The indications so far in this year have been a mixed bag. The industries grew at a four-month high of 2.6 per cent in July, exports also picked up and expanded by a two-year high of 13 per cent in August. However, wholesale inflation for August grew at a six-month high of 6.1 per cent.