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Analysts expect GDP to grow at 7.6% in Q2, but may slow down going ahead

According to Nirmal Bang, capital spending by the government is likely to witness a reduction in second half of FY19 in a bid to meet the fiscal deficit target

November 30, 2018 / 11:03 AM IST

The economic growth for the quarter ended September 2018, which will be announced on November 30 after the market hours, is likely to be strong compared to a year-ago period, but lower than the previous quarter.

The year-on-year growth is expected to be driven by agriculture, manufacturing and construction segments, but sequentially, all major segments dragged except finance and insurance.

Public administration, defence and other services segment, which contributes 11.5 percent to GDP, is seen boosting growth year-on-year as well as quarter-on-quarter.

Nirmal Bang as well as ICICI Bank Research expect gross domestic product growth at around 7.6 percent for the second quarter of FY19, decelerating from 8.2 percent in first quarter but accelerating from 6.3 percent in the same period last year.

"The lead indicators have been robust in Q2FY19 despite a slight slowdown in September. Agricultural activity has been largely steady despite erratic spatial distribution of the monsoon, although it is likely to slow down from the previous quarter," Nirmal Bang said.

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Industry (excluding construction) growth is expected to hold up, supported by the manufacturing sector, although it may slow down from the previous quarter due to high base on account of Goods and Services Tax or GST-related re-stocking, it added.

According to the research house, the services sector (including construction), on the other hand, is likely to witness acceleration supported by higher government spending.

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Nirmal Bang expects India’s gross value added (GVA) growth to come in at 7.5 percent YoY in Q2FY19, while ICICI Bank Research expects GVA growth to moderate to around 7.4 percent (YoY) from around 8.0 percent (YoY) in Q1 led by slowdown in momentum for agriculture and industry.

GVA growth in Q2FY18 stood at 6.1 percent.

After the strong growth in the first two quarters of the year, the second half of FY19 is expected to see some slowdown, brokerages said.

ICICI Bank Research said impact of adverse base effect and tightening of financial conditions would be visible Q3 onwards, while Nirmal Bang said although Q2FY19 growth is likely to remain strong, it expects the growth to slow, going forward.

According to Nirmal Bang, capital spending by the government is likely to witness a reduction in second half of FY19 in a bid to meet the fiscal deficit target, while private sector capex is also likely to remain sluggish ahead of elections.

Going beyond FY19, the research house said the impact of the spending cut and a high base is likely to impact growth in the first half of FY20. Hence, it has consequently cut its GDP growth forecast for FY20 to 7.2 percent from 7.6 percent earlier.
Moneycontrol News
Tags: #Economy #GDP
first published: Nov 30, 2018 11:01 am

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