ICRA expects Q1FY15 GDP growth at 5.5%

ICRA in a release expects Q1FY15 GDP growth to print at 5.5% and current account balance to display a deficit of USD 6-8 billion.ICRA expects the pace of growth of real GDP at factor cost to print at ~5.5% in Q1FY15 as compared to 4.6% in Q4FY14, with a pickup in industrial growth (~3.8% in Q1FY15;-0.2% in Q4FY14) partly benefiting from the favourable base effect. Moreover, the performance of the services sector is expected to remain steady, offset by a moderation in the growth of agriculture in Q1FY15. The Index of Industrial Production (IIP) indicates that manufacturing output rose by 3.1% in Q1FY15 following a contraction of 1.6% each in Q3FY14 and Q4FY14. Additionally, growth improved in Q1FY15 relative to the previous quarter for mining output and electricity generation, led by a pickup in coal production and thermal electricity generation, respectively. Lead indicators of service sector performance indicate a mixed trend for Q1FY15. Following a healthy rabi harvest, heavy rainfall and storms in the second half of May 2014 damaged crops in some regions, while the subsequent dry spell in June 2014 delayed the sowing of kharif crops, leading to the expectation of moderate agricultural growth in Q1FY15.  ICRA expects GDP growth to dip in H2CY14, on account of a mild drag imposed by an inferior agricultural performance, subdued consumption demand and low hydroelectricity generation following the sub-par monsoon. In addition, a likely moderation in rise of exports would dampen GDP growth in the remainder of 2014-15. However, a strengthening of the reform momentum by the Government may support a nascent revival in investment activity and consumption sentiment in the latter part of this fiscal year, boosting GDP growth in Q4FY15. Overall, ICRA expects GDP growth to improve to 5.3-5.5% in 2014-15 from 4.7% in 2013-14.