Country’s GDP is likely to remain below 6 per cent in the second quarter of 2017-18 owing to muted agriculture growth and sluggish performance of manufacturing and mining sector, says a SBI research report. The GDP stood at a three year low at 5.7 per cent for April-June quarter of 2017-18, which the report said has raised concerns about the annual GDP numbers for the fiscal. While it has estimated GDP numbers to remain muted at sub-6 per cent for the July-September quarter, the third and fourth quarter growth is expected to be below 6.5 per cent.
“Second quarter growth numbers are likely to be muted, almost like the first quarter numbers (below 6 per cent), and the reasons are many,” the ‘SBI Ecoflash’ report said. “The support that first quarter got from trade, hotel, transport and public expenditure will not be there in the second quarter,” it added. Further, the report noted the agriculture growth is expected to be muted as rainfall in the first three months of monsoon was hugely deficit in key foodgrain producing states like Uttar Pradesh, Punjab, Haryana, and Madhya Pradesh and there was sluggish growth in manufacturing and mining sector.
“July IIP (index of industrial production) data shows that production was particularly weak in consumer durable goods,” the report said. As per the document, India’s exports growth has started coming down again after picking up for a few initial months in this calendar year. It noted that exports have started their downward trajectory from May. “For example, if we look at US imports of textiles and apparels it has grown 30 per cent between April 2017 and July 2017. However, Indian exports of apparel and textile to the US in July remained at the same level as in April with modest increase in quantity,” the report said.
“But the month of June saw a dip in both quantity as well as value. This is perhaps due to uncertainty before GST which is likely to reflect in coming quarter as well,” it added. As per the report high working capital requirement in the GST regime (based on principle of refund) is hurting the small manufacturers in particular.