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Q2 GDP Growth Likely To Slow To 7.5-7.6%, Says SBI Report

The gross domestic product growth in September-ended quarter is expected to decelerate to 7.5-7.6 percent over the previous three-month period mainly due to slowdown in rural demand, an SBI research report said on Monday.

GDP growth at constant prices (2011-12) was 8.2 percent in the April-June quarter. The Central Statistics Office will be releasing the estimates for GDP growth for July-September on Friday.

The "SBI Ecowrap" report said the SBI Composite Leading Indicator, a basket of 21 leading indicators for September quarter of the current fiscal, showed a marginal declining trend.

Consequently, the headline second quarter gross value added growth could be 7.3-7.4 percent, due to the slowing of rural demand, it said. "We also believe that the growth numbers in the second quarter will be helped by a weak base in September quarter 2017-18.”

"We estimate that the base impact on second quarter GVA growth is around 30 bps. Based on tax collections, we subsequently expect second quarter GDP growth at 7.5-7.6 per cent," said Ecowrap.

It further said commercial vehicle sales, domestic air passenger traffic and cement production have maintained double-digit growth during July-September quarter. All these indicators pushed up GVA.

The monthly data of various indicators for October 2018, however, suggest the GVA growth is slowing due to decline in demand, the report said. "Of particular concern is that non-food credit, bank deposits and sale of passenger and commercial vehicles have slowed down as compared to previous month."

With a slowdown in government spending in the second quarter, the fiscal impulses to growth would now be clearly missing, the report said.

Also read: ICRA Says GDP Growth May Ease To 7.2% In July-September Quarter