"We are clearly seeing a slowdown but beneath the slowdown, there are sectoral divergences.," said Sonal Varma, Nomura.
India's economy grew at 6.6 percent in October-December fiscal, lowest in five quarters, as per the data released by the government on February 28. Sonal Varma, Managing Director and chief India economist at Nomura Financial Advisory and Securities and Pranjul Bhandari, chief India economist at HSBC shared their views on the GDP data.
"We are clearly seeing a slowdown but beneath the slowdown, there are sectoral divergences. So clearly, investment side has held up while the moderation is more because of government consumption and to an extent private consumption but looking ahead, I don't think the impact of the macro policy changes is going to be visible that fast. Of course, there are transmission lags and therefore we do think that in the final quarter, the Q4 growth number, as well as the Q1 FY20 number, will be in the 6-6.5 percent range. So our expectation is that at least for the next six months, one should expect further moderation in the economic cycle before things start looking better," Varma told CNBC-TV18.
"This is a slowing number. After a year, the GDP growth has fallen to under 7 percent and the Q4 as per CSO's numbers will be even weaker, January to March will be 6.3 percent growth. I don't think we should look at the story only from that lens, I think there is another lens which is very important that there are some positives out there too. For instance, in a seasonally adjusted sequential basis quarter-on-quarter (QoQ), growth improved in this quarter. The core gross value added (GVA) number, which is basically GVA minus agriculture and minus public services which we use as a rough proxy for the private sector, rose in this quarter to 7.1 percent from 6.9 percent in the last quarter. We also see from other sectors – for example purchasing managers' index (PMI) services, PMI manufacturing that things are not that bad in the private sector, things are improving. I think these things should be kept at the back of our minds," said Bhandari.
"The macro policies in India are turning at the margin accommodative but whether it is the farm package or banks' lending to the consumer sector, we seem to be getting back into stimulating consumption demand again from a more steady state sustainable point of view, we need investments to pick up and I think that still remains a challenge I would say going forward," Varma added.