GDP Q2: Here’s what major global brokerages feel about the data

Global brokerages were upbeat on India’s prospects following the announcement of gross domestic product (GDP) date for the September quarter. Goldman Sachs and Deutsche Bank were highlighted that the numbers were in line and showed signs of economy coming back on track.

The Indian economy grew 6.3 percent in July-September, recovering from a three-year low growth slump of 5.7 percent in April-June, as companies scaled up production and restocked supplies after goods and services tax (GST) kicked in from July 1.

Data released on Thursday by the Central Statistics Office (CSO) showed that the GST-induced supply shock may have eased considerably, helping a rebound in the broader economy.

Companies and traders had emptied out inventories to carry over as little old stock as possible into July, triggering an unexpected mid-year pre-GST “sale” season on many products at heavy price markdowns. This large scale inventory clearance had caused an economy-wide slowdown, pulling down overall growth to a 13-quarter low of 5.7 percent.

Gross value added (GVA), which is GDP minus taxes, grew 6.1 percent, mirroring greater production activity in factories, according to data released by Central Statistics Office (CSO). GVA growth had significantly fallen in the last few quarters, slipping to 5.6 percent in April-June.

Global investment bank Goldman Sachs observed that growth accelerated in Q3 and was in line with expectations. In fact, India’s real GDP growth recovery was led by higher growth in fixed investments and this is encouraging. There are still some headwinds to activity due to uncertainties around the GST, it added.

Meanwhile, Deutsche Bank said that GDP data indicates that the economy has started to stabilize at a modest pace. It expects growth to average around 6.6% during FY18 and is optimistic about the outlook for FY19 and beyond. On rate cut expectations, it said that it does not expect RBI to cut rates any further and sees the central bank maintaining an extended pause.

Credit Suisse remains constructive on H2 growth on recovery in private consumption, and improving global growth momentum. It also expects inflation to stay in RBI’s target range in H2 as we expect impact of higher oil prices.