Why India must be worried over unimpressive mining sector

Output shrank by 4.2%.

According to DBS, 4Q (Jan-Mar) FY12/13 GDP growth is due for release on 31 May (Fri). After a dismal 4.5% YoY for the Oct-Dec12 quarter, analysts expect the final quarter of FY12/13 to register another sub-5.0%, despite the slight improvement in the underlying momentum. 

On sequential basis, DBS has pencilled in a slight pickup to 1.4% QoQ sa, up from 1.1% average in the prior three quarters.

Here's more from DBS:

This should lead the headline to register 4.7% YoY, taking the FY12/13 average to 5.0%. From the sectors/industry angle, much of the support should stem from stabilisation in factory output (albeit at weak levels) primarily led by the capital and manufacturing goods production.

While weaker on QoQ basis, overall production grew 1.8% in 4Q FY12/13, up from 0.8% in the comparable year ago period.

The underperformance of the mining sector, however, remains worrying as output here contracted 4.2% YoY, down from near flat growth in 4Q FY11/12.

On the other hand, notable pick up in capital goods and consumer goods production are also expected to contribute to the headline improvement in growth.

Agricultural output likely remained stable while services moderated in line with easing demand dynamics.

On the expenditure end, we expect the pullback in inflation readings and the cuts in the benchmark rates to have anchored inflationary expectations.

However, the trend for consumption spending is likely to remain sub-par as signalled by de-growth in the auto production figures.

Elsewhere, corporate investment interests and capex building remained depressed on high borrowing costs and uncertain demand outlook.

The tightening of the fiscal purse strings, meanwhile, should weaken contribution from this component. We expect the trend here to reverse out into FY13/14 on pre-election spending.