GDP and GVA numbers to be released Thursday, experts expect recovery after adverse impact of demonetisation and the pre-GST slowdown.
New Delhi: India’s Gross Domestic Product (GDP) numbers for the second quarter (July-September) of fiscal 2017-18, to be released Thursday, are expected to rebound, breaking a five-quarter slide.
GDP growth had plummeted to 5.7 per cent in the first quarter and experts had said that this was due to the continuing impact of demonetisation, as well as destocking in anticipation of the introduction of the Goods and Services Tax regime on 1 July.
They expect both effects to recede, leading to a second quarter recovery.
The rise in consumer demand in September, around the festivals of Dussehra and Durga Puja leading up to Diwali, is expected to have increased industrial production. Other sectors expected to see an upward curve are two-wheelers and commercial vehicles, oil consumption, cargo traffic, and rail freight.
Almost all the major indicators of the economy took a hit in the first quarter, ahead of the introduction of GST and the impact of the sudden decision to withdraw 86 per cent of India’s total currency in November 2016.
The manufacturing sector grew by only 1.2 per cent, and mining activity contracted to grow just 0.7 per cent. However, the construction sector revived – from a negative growth rate of -3.7 per cent to 2 per cent in the April-June quarter.
Differing opinions
A poll of 52 economists conducted by Reuters concluded that GDP growth for the July-September quarter is likely to be 6.4 per cent against 7.3 per cent in the same quarter last year. The Reuters poll also found that the Gross Value Added (GVA) is expected to grow by 6.2 per cent from 5.6 per cent in the previous quarter.
However, a September 2017 State Bank of India report had predicted that second quarter GDP numbers would remain below 6 per cent, owing to muted agricultural growth and sluggish performance of the manufacturing sector. “The support that the first quarter got from trade, hotel, transport, and public expenditure will not be there in the second quarter,” the report said.
HSBC Global Research, in a report released Tuesday and quoted by Mint, said second quarter growth would show how rapidly the economy was recovering from the disruptions that surfaced in the run-up to the implementation of the GST. The report also said that agricultural growth would be moderate, and industrial growth would normalise to 4 per cent as manufacturing picked up pace.