Gross Domestic Product ('GDP') and Index of Industrial Production
After achieving unprecedented growth of over 9% for 3 successive years between 2005-06 and 2007-08 and recovering swiftly from the global financial crisis of 2008-09, the Indian economy has been going through challenging times that culminated in lower than 5% growth of GDP for 2 consecutive years i.e. 2012-13 and 2013-14.
The growth slowdown in the last 2 years has been broad based affecting in particular the industry sector. For the quarter ended September, Indian GDP grew by 5.3% as compared to 5.7% in the previous quarter. The fall has been primarily due to slow growth in the manufacturing sector. Many analysts have revised their growth projection for the full year to the upper limit of 5.5% while the consensus previously seemed to hover around 5% even as the government has budgeted for 5.7%. The growth of GDP to 7% and above is a compelling need for the Indian economy to provide jobs to the millions.
A Goldman Sachs report on India's GDP expects India to grow to 6.3% in 2015, 6.8% in 2016 and to 7% or more by 2018.
Oil Impact
With OPEC nations deciding to refrain from lowering output, crude oil prices have crashed 50% from June 2014 levels. This augurs well for the Indian economy as it imports nearly 80% of its crude requirements. According to Nomura, with every $10/bbl decline in oil prices, India's GDP will edge up by 0.1%. The profitability of oil marketing companies is slated to improve and is expected to bring down working capital loans and better marketing margins. Besides automobile, paint companies are also expected to benefit substantially.
Originally published February 2015.
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