There’s now a broad consensus that the country’s GDP growth rate will fall at least 2 percentage points by 2009.
How does a 2% drop in GDP growth translate in terms of lower household and per-capita incomes would be the most critical parameter going forward for a host of businesses that sell directly to households: everything from homes, cars, consumer electronics, daily expendables to financial services like insurance and loans.
Our analysis shows that a 2% drop in GDP growth shaves away Rs 3,290 in 2008-09 and Rs 7,820 in 2009-10, both at current prices, from annual household income growth.
On a per-capita income basis — taking a five-member average household — the loss is Rs 658 and Rs 1,564 respectively.
To be sure, the figures are just the drop in relative incomes between the most pessimistic and most optimistic GDP growth projections going around. In absolute terms, GDP and per-capita income will expand this fiscal and next.
We have assumed a 2% drop in GDP growth simply by taking the best-case and worst-case scenarios painted by reputed research organisations.
The best-case projection, by New Delhi-based Centre for Monitoring Indian Economy (CMIE) is a GDP growth of 8.7% in 2008-09. We have assumed a best-case as 8% for 2009-10. And the worst case, by Goldman Sachs, is 6.7% GDP growth this fiscal and 5.8% for 2009-10.
The analysis — done for ET by New Delhi-based analytics firm Indicus Analytics — assumes average inflation at 9% for 2008-09 and 6% for 2009-10. Figures from the Central Statistical Organisation’s end-May 2008
Revised estimates of annual national income, 2007-08, and census projections for population were used to arrive at estimated numbers for GDP and per-capital income for 2008-09 and 2009-10.
At the macro level, for the fiscal ending March 2009, the absolute difference in GDP (at current prices) between best and worst growth projections will be Rs 12,037 crore.
However, the gap widens to a sizeable Rs 2,07,669 crore for 2009-10.
This Rs 2 lakh crore-odd figure is about 8% of private final consumption expenditure (PFCE) for 2007-08. PFCE is the total consumer spend on all products & services.
Investment-led growth, which accounted for over 55% of GDP increase in 2007-08, is perceptibly slowing down on the back of expensive and hard-to-get credit.
Domestic consumer demand (as reflected by PFCE), which accounted for 46% of GDP growth last fiscal, was widely expected to shoulder the burden of economic growth for two-three years.
However, with consumer demand faltering across sectors — from cars, two-wheelers, airline seats, houses to consumer loans — the impending squeeze on household income growth will only aggravate pain across the economy.
Thursday, November 13, 2008
Industrial growth slips in Sept; but ‘encouraging’
New Delhi, Nov. 12
A negative growth of 3.3 per cent in intermediate goods in September compared with 10 per cent in the corresponding period last year pulled down growth in the Index of Industrial Production (IIP) to 4.8 per cent in September 2008 as against 7 per cent in the same month last year.
In contrast, the capital goods sector grew by 18.8 per cent and the consumer durables increased by 13.1 per cent.
The Chief Statistician, Dr Pronab Sen, told Business Line that the negative growth in intermediate goods could be on account of manufacturers of final goods expecting a slowdown in the coming months, and running down their inventories of intermediates.
MANUFACTURING GROWS
The manufacturing sector grew by 4.8 per cent during the month marking a substantial fall compared to 7.4 per cent registered in September last year.
Simultaneously, the growth in the electricity sector also decelerated marginally to 4.4 per cent as against 4.5 per cent recorded in the same month last year.
Mining output increased by 5.7 per cent in September 2008 as against 4.9 per cent in September 2007.
The overall growth in the IIP for the April-September period stood at 4.9 per cent, almost half compared to 9.5 per cent growth recorded in the first half of last fiscal.
Describing the 4.8 per cent growth as encouraging, the Finance Minister, Mr P. Chidambaram, said in a statement that “after the poor results reported for the month of August 2008, the IIP for September 2008 is more encouraging.”
He, however, pointed out that “data collection must be improved and made more relevant, contemporary and universal.” In particular, the Minister pointed out that “the growth in the capital goods sector has been an impressive 18.8 per cent as against 20.9 per cent in September 2007.”
Similarly in September “the growth in consumer goods has been a satisfactory 5.6 per cent as against negative growth of 0.2 per cent in the same month last year”, he said.
Consumer non-durables grew marginally by 2.8 per cent against 2.6 per cent a year ago.
The growth in basic goods sector came down to 4.6 per cent as against 6.5 per cent during the same period last year.
Of the 17 industries, nine posted a positive growth with transport equipment and parts showing the highest growth if 16.8 per cent followed by machinery and equipment other than transport equipment at 16.1 per cent.
Beverages, tobacco and related products grew by 1.7 per cent while paper and paper products and printing grew by 8.3 per cent.
TEXTILES NEGATIVE
However, cotton textiles (-9.3), wood and wood products, furniture and fixtures (-9.7), leather and leather products (-8.6 per cent) registered a negative growth.
Apart from these, jute and other vegetable fibre textiles, textile products (including wearing apparel), basic chemicals and chemical products (except petroleum), rubber, plastic, petroleum and coal products also registered negative growth rates.
A negative growth of 3.3 per cent in intermediate goods in September compared with 10 per cent in the corresponding period last year pulled down growth in the Index of Industrial Production (IIP) to 4.8 per cent in September 2008 as against 7 per cent in the same month last year.
In contrast, the capital goods sector grew by 18.8 per cent and the consumer durables increased by 13.1 per cent.
The Chief Statistician, Dr Pronab Sen, told Business Line that the negative growth in intermediate goods could be on account of manufacturers of final goods expecting a slowdown in the coming months, and running down their inventories of intermediates.
MANUFACTURING GROWS
The manufacturing sector grew by 4.8 per cent during the month marking a substantial fall compared to 7.4 per cent registered in September last year.
Simultaneously, the growth in the electricity sector also decelerated marginally to 4.4 per cent as against 4.5 per cent recorded in the same month last year.
Mining output increased by 5.7 per cent in September 2008 as against 4.9 per cent in September 2007.
The overall growth in the IIP for the April-September period stood at 4.9 per cent, almost half compared to 9.5 per cent growth recorded in the first half of last fiscal.
Describing the 4.8 per cent growth as encouraging, the Finance Minister, Mr P. Chidambaram, said in a statement that “after the poor results reported for the month of August 2008, the IIP for September 2008 is more encouraging.”
He, however, pointed out that “data collection must be improved and made more relevant, contemporary and universal.” In particular, the Minister pointed out that “the growth in the capital goods sector has been an impressive 18.8 per cent as against 20.9 per cent in September 2007.”
Similarly in September “the growth in consumer goods has been a satisfactory 5.6 per cent as against negative growth of 0.2 per cent in the same month last year”, he said.
Consumer non-durables grew marginally by 2.8 per cent against 2.6 per cent a year ago.
The growth in basic goods sector came down to 4.6 per cent as against 6.5 per cent during the same period last year.
Of the 17 industries, nine posted a positive growth with transport equipment and parts showing the highest growth if 16.8 per cent followed by machinery and equipment other than transport equipment at 16.1 per cent.
Beverages, tobacco and related products grew by 1.7 per cent while paper and paper products and printing grew by 8.3 per cent.
TEXTILES NEGATIVE
However, cotton textiles (-9.3), wood and wood products, furniture and fixtures (-9.7), leather and leather products (-8.6 per cent) registered a negative growth.
Apart from these, jute and other vegetable fibre textiles, textile products (including wearing apparel), basic chemicals and chemical products (except petroleum), rubber, plastic, petroleum and coal products also registered negative growth rates.
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