'June quarter might be just 4.3%'

ZyFin's estimates suggest annual GDP growth in the first two quarters of this calendar year would be the 7th worst on record since the introduction of GDP quarterly data in '96

A day ahead of the official release of data on gross domestic product (GDP) growth for the first quarter (April-June) of the current financial year, a financial information agency on Thursday pegged it at 4.3 per cent for the period.

This is distinctly lower than the flat expansion projected by Finance Minister P Chidambaram. The firm, ZyFin (earlier known as BluFin), also announced it would come out with a new concept of GDP, to be issued on a monthly basis.

ZyFin’s estimates suggest annual GDP growth in the first two quarters of this calendar year would be the seventh worst on record since the introduction of GDP quarterly data in 1996. In January-March of 2012-13, it had grown 4.8 per cent.

The firm will come out with monthly GDP indicators, to be based on sequential growth. Economist Surjit S Bhalla, senior advisor, ZyFin, said: “ZyFin has developed a more advanced and immediate model for looking at GDP by launching this monthly indicator and has thus enabled India to take a giant step away from its present state of data darkness.”

Comparing the GDP Growth Indicator data with the official GDP estimates, Bhalla mentioned “The official quarterly year-on-year real and nominal estimates of GDP are helpful in deriving estimates for the implicit GDP deflator alone but these figures don’t meet the purpose of informing investors about the economy’s present status. This is because three-fourths of the figures have already been reported and contained in a year-on-year estimate.”

He said data reporting in developed economies such as the US is done only in sequential terms; they are first adjusted for seasonality. This makes comparisons more realistic and computation of sequential annualised growth rates possible.

In its calculation of GDP growth, there are four components — agriculture (19 per cent weight), manufacturing (15 per cent), construction (seven per cent) and services (59 per cent).

All these sectors have contributed to this sequential low growth of 4.3 per cent, with manufacturing being the biggest culprit, the firm projected. This sector registered a 0.6 per cent fall in the second quarter.

Construction was also a drag on growth, registering around 2.6 per cent expansion, less than half its long run average of seven per cent. Services sector growth slowed as well, to 6.3 per cent, well below its long run and expected average of nine per cent.  

The silver lining, however, is on inflation. ZyFin’s Monthly GDP Growth Indicator (MGGI), which tracks inflation on the basis of the GDP deflator, has measured a collapse ine sequential inflation from 6.7 per cent in the fourth quarter of 2012-13 to 1.7 per cent in the first quarter of 2013-14. According to its estimates, prices did not rise at all in June, as inflation stood at zero per cent.

ZyFin estimates that inflation for the year would fall below six per cent for the first time since 2007, excluding the crisis quarters of 2009.