GDP Growth To Stay Flat At 4.5% In October-December: SBI Economists

The gross domestic growth will stay flat at 4.5 percent in the October-December 2019 quarter, economists at State Bank of India said on Wednesday, two days ahead of the release of official data.

They also said that India faces the risk of getting impacted by the coronavirus epidemic economically because of its high reliance on Chinese imports for various goods. The GDP growth is set to slip to a decadal low of 5 percent in 2019-20, driven majorly by a fall in domestic consumption and sluggish world markets that have impacted Indian exports.

The downward spiral in growth momentum has resulted in a slew of initiatives from the policymaking side, including a cumulative rate cut of 1.35 percentage points by the Reserve Bank in 2019, and a sharp cut in direct taxes for corporates by the government. The SBI economists revised up their FY2019-20 growth estimate to 4.7 percent from the earlier estimate of 4.6 percent because of the base effect triggered by a downward revision in the FY2018-19 growth number by the government.

The "steep" downward revision by the government for the FY2018-19 growth number indicates that the slowdown had set-in since April 2018 onward, the SBI economists said. On the third-quarter estimate, the economists said its composite leading indicator, which analyses inputs from 33 various indicators, suggests that the growth will be flat as the preceding quarter's 4.5 percent growth.

Meanwhile, on the coronavirus scare, it said, "the economic impact is expected to accrue from supply chain risk which may link up with exports as in pharmaceutical sectors". Direct exports of commodities like cotton, diamonds to Hong Kong, and import of auto parts and certain items critical to solar projects will be the areas of impact, it said.

They also noted that poultry sales have also seen some impact although the virus is not of avian origin.