GDP growth rose from 5.7% in the previous period, as demand increased modestly with the easing of the effects of demonetisation.
A Reuters poll of 52 economists shows that India’s GDP growth likely rose to 6.4 percent from a year ago in the July-September quarter, from 5.7 percent in the previous period, as demand increased modestly with the easing of the effects of demonetisation. Forecasts in the poll ranged from 5.9 percent to 6.8 percent.
“India’s GDP growth is expected to rebound, albeit at a slower pace, due to supply disruptions stemming from the goods and services tax,” wrote Shashank Mendiratta, economist at ANZ, who is forecasting a growth of 6.2 percent. “However, growth was probably cushioned by festive demand and an uptick in industrial production,” he said, referring to Diwali in mid-October.
Since mid-year, sales of two-wheelers and commercial vehicles, oil consumption, cargo traffic and rail freight have all increased and raised hopes that the impact of the cash squeeze has bottomed out. Industrial and manufacturing activity as measured by business surveys has also improved in recent months. And the Sensex hit a record high earlier this month.
Indeed, none of the 52 economists in the poll expected growth to slow from 5.7 percent. But few expect a return to growth rates above 8 percent.
The Reuters poll also showed India’s gross value-added (GVA) growth estimate likely accelerated to 6.2 percent, from 5.6 percent. Annual consumer inflation hit a seven-month high of 3.6 percent in October. Oil prices and those of other commodities have risen in recent months. The Reserve Bank of India, which cut the repo rate in August, has little room to ease any further. In the meantime, the government announced a $32.43 billion plan to recapitalise its state banks over the next two years.
Hugo Erken, senior economist at Rabobank, who accurately predicted the surprise slowdown to 5.7 percent in the previous quarter, said that marked the trough in growth. “The stimulus package from the government has not had any effect yet on economic activity in India. It will take some time,” said Erken, who remains the most pessimistic forecaster, looking for 5.9 percent for July-September. But he expects a growth surge above 8 per cent in the current quarter.
Source: Financial Express