India's growth is likely to soften in the September quarter, given the dismal consumption and investment trends following a liquidity squeeze in the shadow banking sector
India’s Gross Domestic Product (GDP) growth is expected to slow down to 7.4% in the July-September quarter of the current financial year, down by 0.8 percentage points from the previous quarter, a Reuters poll has shown. In the first quarter, India clocked 8.2% economic growth rate arguably boosted by a favourable base effect.
“India’s growth is likely to soften in the September quarter, given the dismal consumption and investment trends following a liquidity squeeze in the shadow banking sector,” said Charu Chanana, emerging Asia economist at Continuum Economics in Singapore. However, even at 7.4%, India’s GDP growth will be better than China.
Other economists too predict a lower growth rate in the second quarter. Rating agency ICRA has estimated a fall of whopping 1 percentage point to 7.2%, while SBI Research pegs it at 7.5%-7.6%. SBI’s Chief Economist Soumya Kanti Ghosh said that even Q2 will witness a favourable base effect.
“We also believe that the growth numbers in Q2 will be helped by a weak base in Q2FY18,” he said in the SBI Eco Wrap report. India’s GDP growth rates in the corresponding quarters (Q1 & Q2) last year were 5.6% and 6.3%, mainly due to disruptions caused by the implementation of the Goods and Services Tax (GST).
ICRA’s Principal Economist Aditi Nayar said that the effect of the uneven and sub-par monsoon and instances of crop damage will be reflected in GVA. While the agriculture sector is expected to slow down, commercial vehicle sales, domestic air passenger traffic and cement production will clock double-digit growth during the quarter.