Weak growth in industry, agriculture hits GDP forecast; economic expansion to slow in Q1 

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Updated: August 22, 2019 1:50:10 PM

Manufacturing and construction are expected to show slow momentum in growth, but the hydroelectricity is likely to boost the electricity generation in the first quarter.

gdp forecast, gdp estimate, ICRA, rating agency, manufacturing, slowdown, manufacturing sector, manufacturing sector growth, agricultureManufacturing GVA growth is expected to ease significantly to around 5.0% in Q1 FY20 from 12.1% in Q1 FY19.

Amid a slowdown in industry and agriculture, credit rating agency ICRA has estimated the GDP growth rate at 6 per cent in the first quarter of the current financial year. GDP growth rate in Q1 FY19 was 8 per cent. Manufacturing and construction are expected to show slow momentum in growth, but the hydroelectricity is likely to boost the electricity generation in the first quarter, said the report. Expectations of GVA growth rate has been eased substantially to 5.8 per cent in Q1 FY20, which was 7.7 per cent in the same duration last year. The RBI has also pointed out the weakness in demand, consumption and investment in the economy. 

“Industrial growth is expected to decelerate sharply to 5.0% in Q1 FY20 from 9.8% in Q1 FY19, driven by factors such as weakening domestic demand, a contraction in exports, muted investment activity during the elections and an unfavourable base effect,” said Aditi Nayar, Principal Economist, ICRA. Manufacturing GVA growth is expected to ease significantly to around 5.0% in Q1 FY20 from 12.1% in Q1 FY19 and the weak trend in various key inputs such as steel and cement production show sign of subdued performance of the construction sector in Q1 FY20, she added. 

The 4th Advance Estimates of crop production has indicated a year-on-year decline in rabi output in 2019 for pulses, coarse cereals and rice, whereas oilseeds and wheat recorded a healthy production. The ICRA report also underlines a considerable 33 per cent deficit in rainfall in June 2019, which would have hampered activity in the agricultural sector. 

Services sector growth is expected to remain steady at 7.1 per cent in Q1 FY20, which was almost at the same level a year ago. GVA growth of financial, real estate and professional services in Q1 FY20 is also expected to surge taking cues from the enhanced profitability metrics of the banking system, led by lower provisioning, treasury gains and a turnaround in FII inflows.

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