India’s GDP growth seen at 6.7-7.2% in 3rd quarter


NEW DELHI: The Indian economy is likely to have grown at a slower pace of 6.7-7.2% in the third quarter of FY19, independent economists said ahead of Thursday’s release of the official estimates.

The moderation is in line with an expected slowdown in the second half of the financial year. The economy had grown 7.1% in the second quarter and 8.2% in the first quarter, logging 7.6% for the first half.

The first advance estimates of gross domestic product (GDP) released earlier this month showed the economy is likely to expand 7.2% in FY19. The Reserve Bank of India expects FY19 growth at 7.4%.

Comparatively, China’s economy grew 6.4% in the October-December quarter. The slowdown in Q3 is on account of the base effect of higher growth last year and liquidity constraints.

Untitled-10

“Last year, the first half was weak and the second half better, but the trend has reversed this fiscal,” said Devendra Kumar Pant, chief economist at India Ratings. The rating company pegged GDP growth at 6.9% and value added growth at 6.6%.

HDFC Bank, Kotak Mahindra Bank and Yes Bank expect GDP growth of 6.8% in the December quarter and gross value added at 6.6%. “We expect GDP to moderate in the third quarter, led by softer consumption demand, stagnant exports and investments amid tighter financial conditions. The revisions to quarterly estimates will need to be watched out for,” said Upasna Bhardwaj, an economist with Kotak Mahindra Bank.

“Unfavourable base effect and a slight moderation in consumption will weigh in on growth numbers in Q3,” said Tushar Arora, a senior economist at HDFC Bank. The third-quarter forecast is a marked moderation from the nine-quarter high growth of 8.2% in the June quarter, which benefitted from the base effect of low growth a year earlier following demonetisation in November 2016 and a disruption in the run-up to the goods and services tax rollout in July 2017.

India’s industrial output expanded 4.6% in the first nine months of the financial year, with manufacturing growing 4.7% compared with 3.8% a year earlier, according to the Index of Industrial Production (IIP), a quantity-based measure.

Since GDP is assessed on value added, manufacturing GDP growth can be higher than that measured by IIP. Arora of HDFC Bank said growth in the fourth quarter will be slower and that would be when the complete impact of the slowdown in agriculture would come in.

According to DK Joshi, chief economist at Crisil, the high base effect and sluggishness shown by the consumer goods sector such as auto and some weakness in agriculture will put downward pressure on growth. Further, a slowing global economy amid trade tensions is not supportive.





READ SOURCE

READ  Government panel for raising minimum wage to Rs 375

LEAVE A REPLY

Please enter your comment!
Please enter your name here