Domestic rating agency ICRA has estimated the GDP growth to remain flat at 7.2 percent in the first quarter under the gross value added (GVA) calculation, thanks to an uptick in the industrial sector negating the decline in services and farm sectors.
Pick-up in the industrial sector will help offset the decline in services and agriculture and allied activities, which will help the economy grow at 7.2 percent in the June quarter, same as in the corresponding period last year, Icra senior economist Aditi Nayar said in a note today.
This growth will be lower than what the GDP notched up in the March quarter at 7.4 percent.
"We expect a pick-up in industrial growth to 7.1 percent in the June 2016 quarter, up from 6.7 percent a year ago, to help offset a decline in growth of services and agriculture and allied activities.
"Accordingly, growth of GVA at basic prices is expected to remain steady at 7.2 percent in Q1, in line with the print for the year-ago period, albeit easing mildly from 7.4 per cent recorded in Q4 of last fiscal year," Nayar said.
The rating outfit expects real manufacturing growth to have improved to 8 percent from 7.3 percent a year ago, supporting a pick-up in industrial growth.
"Corporate earnings for Q1 suggest the full impact of increase in commodity prices is yet to be felt in the current fiscal. As a result, earnings growth has been higher than revenue growth, and is also likely to have exceeded the volume trend revealed by the index of industrial production." That apart, growth of power generation improved sharply to 9 percent from 2.3 percent a year ago, led by a pick-up in thermal electricity generation growth which jumped to 13 percent from a paltry 1 percent in the corresponding period last fiscal year.
But contraction in the output of capital goods as well as the Central government's capex, will weigh on growth of gross fixed capital formation in the reporting quarter.
The agency expects the pace of growth of agriculture, forestry and fishing to ease to 2.2 percent from 2.6 percent. This is despite the boost from aggregate rise in production of rabi crops (led by wheat) even after drought-like conditions that prevailed in Q1 over most parts of the country.
Service sector growth is likely to report only 8.5 percent growth, down from 8.8 percent a year ago, following the moderation in expansion of bank deposits and credit and lead indicators of trade such as air cargo traffic and railway revenue from freight.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
