Financial Year (FY) 2013-14 was the second consecutive year of sub 5% GDP growth. Against the estimates of 4.9%, Indian economy grew at only 4.7% in FY 2013-14. And in the March quarter of 2014, the GDP registered 4.6% growth. It noteworthy that the first and second quarter of the fiscal year, saw an upward revision from 4.4% to 4.7% and from 4.8% to 5.2%, respectively. The third quarter however saw a downward revision in from 4.7% to 4.6%.
 

Indian economy shows stagnated growth

Last Released and revised on May 30, 2014
(Source: CSO, PersonalFN Research)  

Key Findings:

• In FY 14, agricultural growth (4.7%) turned out to be higher than 1.4% registered in FY13. In the March quarter of FY 14, sector grew at impressive 6.3%.
   
• By registering negative growth of 1.4% and 0.7% respectively, mining & quarrying and manufacturing continued to remained laggards. In the 4th quarter, mining activity decelerated by 0.4% and manufacturing also registered negative growth of 1.4%.
   
• Financing, insurance, real estate and business services witnessed a better double digit growth of 12.9% in FY 14, as against 10.9% reported in FY 13, collectively by these sectors.
   
• Important economic indicators exposed weaknesses in the economy. Gross Fixed Capital Formation (GFCF) and Private Final Consumption Expenditure (PFCE) showed fall on Year-on-Year basis. This indicates that, in FY 14, demand remained tepid and capex cycle too didn’t recover.
   

Impact on Capital Markets:

Low growth for FY 14 was discounted by markets. Thus, equity markets didn’t move much on account of moderation in the economic growth.

On the debt side, yield on 10-year sovereign benchmark bond fell. However, the fall in yield was mainly due to fiscal deficit coming in lower at 4.5% as against the budget estimate of 4.8% and revised estimate of 4.6%.

Going forward, markets may take cues from the economic and fiscal policies of the new Government. Inflation and monetary policy measures would also have impact on capital markets.

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