GDP Growth Seen Gaining Pace In The Third Quarter
What to expect from Q3 GDP data out on Wednesday.
The Indian economy is expected to have picked up pace in the October-December quarter due to stronger growth across services and industry.
Government data due to be released on Wednesday is likely to show a pick up in gross value added growth to 6.7 percent in the third quarter of the current fiscal, according to a Bloomberg survey. This compares to 6.1 percent growth in the second quarter and 6.7 percent in the year-ago quarter. Gross domestic product growth is seeing rising to 7 percent compared to 6.3 percent in the second quarter. GVA has become a preferred measure of economic growth as it strips out the impact of indirect taxes and subsidies.
Economists expect the growth recovery that began in the second quarter to gather pace in the third quarter. A rebound in industrial activity, which is likely to stabilise after GST related disruptions, is expected to push growth higher, along with strength in the services segment. GST was implemented starting July 1 and led to some volatility in production cycles.
We expect economic recovery that started in Q2 to continue its upward climb in the third quarter to 6.9 percent (real GDP, YoY) slightly lower than 7 percent registered in the corresponding period of last year but significantly higher than 6.3 percent clocked in Q2 of the current fiscal. For the year as a whole, we expect GDP growth to be around 6.5 percent (with possible upside), implying a residual of 7.2 percent for the fourth quarter.HDFC Bank Report
Among key sectors, economists are expecting to see a pick-up in both manufacturing and construction.
Rating agency ICRA expects GVA growth in the manufacturing segment to rise to 7.5 percent in the third quarter, compared to 7 percent in the second quarter. GVA growth in the construction sector is expected to rise to 6.5 percent in the October-December quarter compared to a modest 2.6 percent in the July-September period. A pick-up in construction is expected based on the trends seen in sales of inputs like cement and steel, said an ICRA report.
Growth in agriculture is seen moderating to 1.5 percent compared to 1.7 percent in the last quarter, the report said.
After muted activity during H1 FY2018, partly on account of the structural transition to the Goods and Services Tax, signs of a pick-up in economic growth are starting to appear. Higher growth in volumes in manufacturing and some of the services sub-sectors and in the Government of India’s expenditure, a favourable base effect and an improvement in corporate earnings are expected to contribute to a sequential recovery in GVA growth.Aditi Nayar, Principal Economist, ICRA
The Indian economy has been hit by twin shocks - demonetisation and GST - over the past 18 months. Both have led to disruption in economic activity, which is only now starting to rebound. For the full financial year 2018-19, the Reserve Bank of India has pegged growth at 7.2 percent compared to 6.6 percent in the current year. A modest revival in the investment cycle along with a pick-up in exports is expected to support this recovery, the RBI said.
Minutes of the Monetary Policy Committee released last week showed that some members of the panel saw the recovery as nascent. RBI governor Urjit Patel cited the need to support this nascent recovery as one reason for voting for a status quo on interest rates.
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