GDP Growth for 2009-10: Is Surprise on Upside in the Offing!!!!

The consensus estimate for 2009-10 GDP growth is 6 per cent. The estimate was based on poor monsoon (23 per cent below normal) and drought situation in larger parts of the country leading to an expected deterioration in agricultural output. But recently published industrial growth rate data for the month of August 2009 at 10.4 taking the overall growth rate to 5.8 per cent (for Apr.-Aug. 2009) could alter the number game and therefore, bottom out story. According to my personal estimate, GDP growth could clock 6.7 per cent even after taking consideration of subdued agricultural growth rate. Even if agriculture (with a weight of 17 per cent of GDP) experiences de-growth at 3 per cent (growth at 1.6 per cent during 2008-09), the above would get offset by a relatively stronger industrial production. Industrial growth rate (with a weight of 26 per cent of GDP) is expected to be driven by mining, capital goods, consumer durables and partly by base effect. Industry is estimated to clock 7 per cent growth (2.6 per cent during 2008-09). Considering the strong linkages industry has with services sector (with a weight of 56 per cent of GDP), the latter is estimated to grow at 9.6 per cent (9.4 per cent during 2008-09). If one compares the q-o-q GDP growth data of last fiscal and current one, a mirror image of last fiscal could be observed. While 2008-09 saw a declining growth phase in the last two quarters owing to global meltdown following Lehman Brothers collapse during September 2008, this year the story would be different with growth recovering sharply in the last two quarters. The poor agriculture growth is expected to be more than compensated by disbursal under NREG Scheme in rural areas and payment of remaining 60 per cent sixth pay commission arrears, offsetting the drought effect and leading to an increase in demand for consumer durables, especially autos and white goods. So, keep the fingers crossed.