GDP
is defined as Gross Domestic Production, which is total market value of all the
goods and services produces within a country in a defined time period. The
values used are market values of the final goods and services.
In
India, GDP is calculated on the basis of GVA (Gross Value Added) by each
industry at the basic prices. Previously, GDP was calculated on the basis of
the factor prices. GVA is value of output less the value of intermediate
consumption. GDP is sum of GVA for each sector net of taxes and subsidies.
GVA approach for calculating GDP
GVA
at basic prices was INR 25.80 lakh Cr for Q1 FY16 as against INR 24.10 lakh Cr
for Q1 FY15. Thereby, it transcended by
7.10% y-o-y. CSO (Central Statistical
Office) divided Indian industry into following subheads:
a.
Agriculture,
forestry and fishing
Ø Quarterly GVA at basic prices for this sector grew at 1.9%
in Q1 FY16. It had grown at (1.4%) in Q4 FY 15 and 2.6% in Q1 FY15.
Ø This sector is further decomposed into fruits, vegetables
and crops; and live stock, forestry and fisheries. Share of both sub sector is
shown in the graph given below:
Figure 1: Break
up of agriculture, forestry and fishing industry
Ø Live stock, forestry and fisheries grew at 6% for FY16 while
fruits, vegetables and crop grew at -1%.
This is the result of lower Rabi output in Q4 FY15 compared to Q4 FY14.
Output of Q4 is realized in Q1 of the next financial year.
Ø Lower outputs are due to deficiency in rains.
Ø Fruits, vegetables and crops slumped due to rain deficiency.
As per IMD’s data, rain deficiency is at 12% as on 28th Aug, 2015.
Ø Progress of rainfalls is expected to have an impact on the
monetary policy figures as well as growth of this sector.
Ø Poor September rains can belittle the GDP growth rates. At
the same time, if rainfall bounces backs in September, it should ameliorate the
growth rates of GDP for the upcoming quarter as well as year.
b.
Mining and
quarrying
Ø Quarterly GVA at basic prices for this sector grew by 4.0%
in Q1 FY16.
Ø This sector comprises of production of coal, crude oil,
natural gas as well as mining.
Ø Following table shows growth of each component of mining and
quarrying:
Q1 FY 16
|
Q1 FY 15
|
|
Coal production
|
7.3%
|
6.6%
|
Crude Oil
|
-0.9%
|
-0.1%
|
Natural Gas
|
-4.2%
|
-3.9%
|
Mining
|
0.7%
|
2.9%
|
Table 1: growth
components of mining and quarrying sector
Ø Crude oil prices are further expected to decline on account
of demand – supply mismatch. This would trigger the growth for the industry as
the costs of production as well as selling expenses (transportation expenses)
are expected to reduce.
Ø Negative growth of crude oil prices can give a boost to
automobile industry. As seen in July 2015 results, sales of the passenger cars
were boosted by 17.50% with sharp fall in crude oil prices.
Ø If crude prices reduce further, automobile segment would
grow further.
c.
Manufacturing
Ø Quarterly GVA at basic prices for this sector grew at 7.2%
in Q1 FY 16. In Q1 FY 15, it grew at 8.4%.
Ø Composition of this sector is shown in the following graph:
Figure 2:
components of manufacturing sector
Ø On account of reduction in crude prices, it is expected that
better capacity utilization rates shall be picked up in upcoming times.
Ø This sector is further expected to grow in the coming
quarters, specifically private organized manufacturing sub sector.
Ø With the growth of this sector, credit facilities required
would also grow. Thereby, banking sector is also anticipated to grow along with
it.
d.
Electricity,
gas, water supply and other utility services
Ø Quarterly GVA at basic prices for this sector grew at 3.2%
in Q1 FY 16. It grew at 10.1% in Q1 FY 15.
Ø The key indicator of growth rate in this sector is
electricity, which grew at 2.3% in Q1 FY 16 as against 11.3% in Q1 FY 15.
Ø The slowdown in this sector is due to slowdown in the
manufacturing sector. With revival of manufacturing sector, capex will be there
in this sector and will revive.
e.
Construction
Ø Quarterly GVA at basic prices for this sector grew by 6.9%
for Q1 FY 16 as against 6.5% for Q1 FY 15.
Ø Key components of this sector along with their growth rates
are given below:
Q1 FY 16
|
Q1 FY 15
|
|
Cement production
|
0.9%
|
9.6%
|
Consumption of steel
|
7.1%
|
0.7%
|
Table 2: growth
components of construction industry
Ø Decline in cement consumption is majorly on account of
slowdown in real estate sector.
Ø Real estate sector, specifically housing sector, has supply
more than demand.
Ø As per JLL, a property consultant, inventory levels (unsold
housing units) in Bangalore in housing industry is 84000, which is calculated
to be inventory levels for 32 months.
Ø Due to this, there will be rise seen in the asset backed
loans by EPC contractors.
Ø While housing industry is facing stiff times, highway,
aviation, port construction industries are having reckonable growth rates. The
same can be considered to be true as consumption of steel has increased.
Ø Consumption of steel has increased on account of cheaper
prices. Manufacturing of steel is still having rugged times due to dumping of
steel by China in India.
f.
Trade, hotels and Transport & communication
Ø Quarterly GVA at basic prices for this sector grew at 12.8%
in Q1 FY 16 as against 12.1% in Q1 FY 15.
Ø Key indicator used for measuring trade sector is collection
of sales tax. It grew at 9.4% for Q1 FY 16.
Ø In case of transport sectors, passengers handled by the
civil aviation, cargo handled by civil aviation and cargo handled at major
ports reckoned growth rates of 15.3%, 8.7% and 4.5% respectively for Q1 FY 16
as against growth rates of 7.5%, 6.2% and 4.2% respectively for Q1 FY 15.
Ø Sales of commercial vehicles registered growth of 3.6% for
Q1 FY 16 as against growth of (16.1%) for Q1 FY 15.
g.
Financial,
insurance, real estate and professional services
Ø Quarterly GVA at basic prices for this sector grew at 8.9%
for Q1 FY 16 as against 9.3% for Q1 FY 15.
Ø Main components of this sector are as shown in the pie chart
below:
Figure 3:
components of finance, insurance, real estate and professional services sector
Ø Slowdown was seen in banking deposits and credit. Credit
growth declined due to fall in the manufacturing index.
Ø Also, as global growth remains weak, exports are expected to
decline and thereby export credit facilities are expected to remain unutilized
and thereby further decline in credit growth is expected.
h.
Public
administration, defense and other services
Ø Quarterly GVA at basic prices for this sector grew at 2.7%
in Q1 FY 16 as against 2.8% in Q1 FY 15.
Ø Union government expenditure, key indicator of this sector,
grew at 4.2% in Q1 FY 16 as against 8.2% in Q1 FY 15.
Ø Growth slowed down in this category signaling fiscal consolidation
efforts by the government.
Quarterly GDP
components approach for calculating GDP:
Basic formula for calculating GDP is as follows:
Y = C + I + E + G
Where Y = GDP
C = Consumer spending
I = Investment made by industry
E = Excess of exports over imports
G = Government spending
a.
Consumer
spending:
Ø Private Final Consumer Expenditure is expenditure incurred
on final consumption of goods and services by the resident households and
non-profit institutions serving households.
Ø Consumer spending has grown by 58.7% in Q1 FY16 as against
58.4% in Q1 FY15. This means that standard of living has increased and thereby
cost of living has increased
b.
Government
spending:
Ø Government Final Consumption Expenditure is the total value
of goods and services produced by government.
Ø Government is planning to invest 8.5 lack crore in Indian
Railway.
Ø Government spending has grown by 11.4% in Q1 FY16 as against
12.1% in Q1 FY15.
c.
Investment made
by the industry:
Ø Investment made by the industry is measured in terms of
gross fixed capital formulation. It shows capex made by the industry.
Ø Gross fixed capital formulation grew by 29.8% in Q1 FY16 as
against 30.4% in Q1 FY15.
Ø This shows slowdown in the manufacturing industry.
d.
Excess of
exports over imports
Ø Deficit was INR 39102 Cr in Q1 FY 16 as against deficit of
INR 34550 Cr in Q1 in FY 15. Deficits have increased in spite of lowering of
crude oil prices.
Ø The reason behind this suggests that exports have reduced
significantly on account of global slowdown in the demand levels.
Appendix – 1
Quarterly estimate of GVA at basic prices in Q1 (April –
June) of 2015 – 16
(Basic price at 2011-12)
Industry
|
April
– June (Q1)
|
||||
GDP
for Q1 (in INR Cr.)
|
Percentage
change over previous year
|
||||
2013-14
|
2014-15
|
2015-16
|
2014-15
|
2015-16
|
|
1. Agriculture,
forestry and fishing
|
350052
|
359258
|
366124
|
2.6
|
1.9
|
2. Mining
and quarrying
|
67555
|
70488
|
73289
|
4.3
|
4.0
|
3. Manufacturing
|
419403
|
454620
|
487134
|
8.4
|
7.2
|
4. Electricity,
gas, water supply and other utility services
|
52498
|
57794
|
59657
|
10.1
|
3.2
|
5. Construction
|
182284
|
194168
|
207580
|
6.5
|
6.9
|
6. Trade, hotels and Transport & communication
|
406716
|
456125
|
514487
|
12.1
|
12.8
|
7. Financial,
insurance, real estate and professional services
|
480626
|
525122
|
571740
|
9.3
|
8.9
|
8. Public
administration, defense and other services
|
284255
|
292195
|
300044
|
2.8
|
2.7
|
GVA at Basic Price
|
2243389
|
2409770
|
2580056
|
7.4
|
7.1
|
Appendix 2
Quarterly estimates of expenditures of GDP in Q1 (April – June) of 2015 – 16
(at 2011- 12 prices)
Item
|
April
– June (Q1)
|
||||
GDP
for Q1 (in INR Cr.)
|
Percentage
change over previous year
|
||||
2013-14
|
2014-15
|
2015-16
|
2014-15
|
2015-16
|
|
1. Private
Final Consumption Expenditure
|
1397414
|
1483613
|
1592806
|
58.5
|
58.7
|
2. Government
Final Consumption Expenditure
|
301793
|
306488
|
310018
|
12.1
|
11.4
|
3. Gross
Fixed Capital Formation
|
708280
|
769880
|
807225
|
30.4
|
29.8
|
4. Change
in stocks
|
40016
|
41969
|
44076
|
1.7
|
1.6
|
5. Valuables
|
32902
|
41528
|
49589
|
1.6
|
1.8
|
6. Exports
|
546989
|
596944
|
558269
|
23.6
|
20.6
|
7. Less
imports
|
655135
|
631494
|
597371
|
24.9
|
22.0
|
8. Discrepancies
|
4164
|
(74273)
|
(51615)
|
(2.9)
|
(1.9)
|
GDP
|
2376424
|
2534654
|
2712998
|
6.70
|
7.00
|
References:
1.
GDP quarterly
estimated by CSO as given on
ABOUT
THE AUTHOR
This report is primarily
prepared by Virali Shah who is an MBA from Institute of Management, Nirma
University and edited by Members of Economist Team of eRT CAPITAL. Virali Shah is a credit analyst at State Bank of India. This report
solely represents the author’s views and not the views of State Bank of India.
Disclaimer
This document is solely for the personal information of
the recipient, and must not be singularly used as the basis of any investment
decision. Nothing in this document should be construed as investment or
financial advice. Each recipient of this document should make such
investigations as they deem necessary to arrive at an independent evaluation of
an investment in the securities of the companies referred to in this document
(including the merits and risks involved), and should consult their own
advisors to determine the merits and risks of such an investment. The information in this document has been printed on the
basis of publicly available information, internal data and other reliable
sources believed to be true, but we do not represent that it is accurate or
complete and it should not be relied on as such, as this document is for
general guidelines only.
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