Citigroup - India Economics

Citigroup on India Economy and GDP Growth

4QFY07 GDP rose by 9.1%yoy, with growth led by agriculture (+3.8%), industry (+11.2%) and services (+9.9%). Quarterly growth was only slightly below consensus, largely due to a revision in the base, with 4QFY06 GDP revised from 9.3% earlier to 10%yoy ( however, full-year FY06 GDP remained unchanged at 9% due to downward revisions in earlier quarters)

Key highlights for FY07 include: (1) a continued uptrend in industry, led by double-digit growth in manufacturing (+12.3% in FY07) and construction (+10.7%yoy); (2) strong trends in services, led by trade, hotels and communication (+13%) and financial services (+10.6%); (3) Data on consumption and investment indicate that total consumption during FY07 was at 68% of GDP( of which private consumption was 56%), while fixed capital formation stood at 29.5%.

Maintaining our Macro Forecasts: While the near-term outlook remains clouded given the stepping up of the RBI tightening stance since last October; we expect GDP growth to sustain at 9% levels in FY08; given the continuation of the key growth drivers, an uptrend in savings and investment, and our expectations that inflation and interest rates are close to peaking.