India's FY07 GDP growth accelerated to 9.4% Y-o-Y, up from 9.0% Y-o-Y during FY06. Growth was higher than both our and street expectations of 9.0% Y-o-Y. Industry and services continued to be the drivers for growth, both showing a double digit growth. Agriculture grew at trend level.

Q4 GDP growth was at 9.1% Y-o-Y a tad lower than our estimate of 9.2% Y-o-Y and the street estimate of 9.5% Y-o-Y. Q4 growth accelerated in comparison with Q3 growth of 8.7%, but was lower than the Q4 FY06 growth of 10%. Growth for Q4 was at 11.2% Y-o-Y for industry and 9.9% for services, while industry growth accelerated, that for services decelerated from Q3. Agriculture provided an upside in Q4, with a growth of 3.8% Y-o-Y, up from 1.6% Y-o-Y during Q3.

Component wise break up for industry in FY07 indicates that three segments - mining, manufacturing and electricity strengthened, while construction showed a dip. With respect to services, 'trade, hotels, transport and communication' strengthened significantly, while financial services was a tad lower and community, social and personal services' was stable at the previous year's levels.

The upside on FY07 numbers and strong Q4 numbers suggest that the Indian economy stays strong. It reflects little impact of (a) monetary tightening so far and (b) some signs of softening in the global economy. We expect firmness in growth to continue into FY08 as well. If strength in credit growth and industrial production numbers is reflected in Q1 FY08 as well, it would call for an upward revision to our GDP growth forecast of 8.2% Y-o-Y in FY08.

GDP break up

Note: Figures for FY07 in blue denote strengthening from FY06, while figures in red denote weakening

Source: CSO