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Analysts foresee 4.5 to 4.7 per cent GDP growth in 3rd quarter

Modest uptick in services, industry and agricultural growth predicted

Published: 27th February 2020 03:02 AM  |   Last Updated: 27th February 2020 01:26 PM   |  A+A-

SBI

For representational purpose (File Photo | EPS)

By Express News Service

HYDERABAD:  India’s GDP growth in the October-December quarter of the financial year 2018-19 will likely print at 4.5-4.7 per cent, according to researchers.

As per SBI Research’s composite leading indicator, which analyses inputs from 33 various indicators, growth will remain flat in Q3, at 4.5 per cent clocked in Q2; ICRA believes third-quarter GDP may settle at around 4.7 per cent led by a modest uptick in services, industry and agricultural growth.

However, SBI revised its FY20 estimate upwards to 4.7 from 4.6 per cent projected earlier, because of the base effect triggered by a downward revision in the FY19 growth number.

As per government estimates, growth is set to slip to a decade-low of 5 per cent in FY20, driven chiefly by a fall in domestic consumption and sluggish world markets that have impacted Indian exports. Besides, India may be impacted by a coronavirus, given its reliance on Chinese imports.

While SBI believes the coronavirus impact will accrue from supply chain risk, which may link up with exports as in pharmaceutical sectors, ICRA said the extent and duration of the virus outbreak would test the sustainability of the nascent upturn in growth in Q4.

Meanwhile, government spending is expected to remain one of the key drivers of growth in Q3. The pace of expansion of the government’s non-interest expenditure rose to a considerable 27.7 per cent in Q3 from 25.1 per cent in Q2, which is likely to support service sector and overall GVA growth.

“For the 22 state governments for which data is available, revenue expenditure growth eased to 12.7 per cent in Q3 from 16.8 per cent Q2, while remaining in double digits. Additionally, despite high slippages during Q2, the profitability metrics of the banking sector remained stable led by recoveries from the NCLT accounts,” said Aditi Nayar, principal economist, ICRA.

Several lead indicators of the trade sector improved in Q3, relative to the weak performance in Q2, such as air passenger traffic, foreign tourist arrivals, railway-carrying freight, diesel consumption and the sales of commercial vehicles. However, the YoY performance of cargo handled at major ports, air cargo traffic and service sector exports eased somewhat in the same period. ICRA also expects electricity, gas, water supply and other utility services to report a contraction of 3 per cent in Q3, which would exert the chief drag on growth in the quarter.



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