Growth was below ours and consensus estimates (6.1%), with the surprise element being the 2.2% contraction in agriculture (partly due to a high base effect). While industry growth slowed to 2.4%, growth in services remained buoyant – up 9.9% largely due to a reflection of the pay commission outgo (community services, up 17.3%). With 9MFY09 GDP growth at 6.9%, growth in 4QFY09 would need to come in at 7.6% in order for the government to achieve its 7.1% advance estimate put out earlier this month. This appears optimistic given the weakening global environment and continued contraction in trade.
The deceleration in investment continued, with fixed capital formation slowing to 5.3% in 3Q vs. 12.6%yoy during 1HFY09. However, headline consumption growth remained buoyant at 7.8% (vs. 7.3% in 1HFY09) with the deceleration in the private sector +5.4% being offset by the pay revision which is accounted under public consumption – up 24.6% yoy.
Citi revised India’s FY 2010 GDP expectations to 5.5% with contraction in exports, a further deceleration in investment, and a moderation in consumption.