despite GDP forecast, India inc is optimistic

New Delhi : India Inc expects the country’s fiscal 2017-18 economic growth to be above the 6.5 per cent-mark, owing to a favourable base effect. The industry reaction followed an estimate of national income for 2017-18, released by the Central Statistics Office (CSO), which showed that implementation of the GST and subsequent slowdown in the manufacturing sector was expected to drag down India’s growth to 6.5 per cent in financial year 2017-18. India’s projected economic growth rate for 2017-18 will be lower than the 7.1 per cent achieved in 2016-17, the data showed. “The advance estimates for the full year have been based on limited data, which would be available for a period of 6-9 months for different sectors. Therefore, they are not fully factoring in the expected pickup in growth in the later months of FY2018, related to a favourable base effect and a ‘catch up’ following the subdued growth momentum in H1 FY2018,” said Aditi Nayar, Principal Economist at ICRA. “Accordingly, the advance estimates for GDP and GVA growth appear to be understating economic expansion for FY2018, in our view,” Nayar added. The data disclosed that sectors like ‘public administration, defence and other services’, ‘trade, hotels, transport, communication and services related to broadcasting’, ‘electricity, gas, water supply and other utility services’ and ‘financial, real estate and professional services’ registered a growth rate of over seven per cent. On the other hand, growth in the ‘agriculture, forestry and fishing’, ‘mining and quarrying’, ‘manufacturing’ and ‘construction’ sectors “is estimated to be 2.1 per cent (from 4.9 per cent), 2.9 per cent (from 1.8 per cent), 4.6 per cent (from 7.9 per cent) and 3.6 per cent (from 1.7 per cent)”, respectively. The CSO used the first seven-month’s data, of 2017-18, to extrapolate figures for the full fiscal. “Since these estimates are based on data till November 2017, it has not captured the latest up-tick in the vehicle sales and the improvement in the steel and cement sectors; we expect the final numbers to be revised upwards, as and when they happen,” said Arun Thukral, MD, Axis Securities. “Given the tepid growth estimates from agriculture, it gives us a feeling that the budget 2018 will have a higher focus on agriculture and rural economy. And as the estimates are missing the RBI expectations, the central bank is likely to pause in its next policy meeting in February 2018,” he added. According to Anis Chakravarty, Lead Economist at Deloitte, the estimate for yearly GDP showed that growth momentum was expected to improve in the coming quarters, in line with signals from leading indicators. “As such, for a broad based recovery the rural economy needs to recover and we can expect the upcoming budget to focus on alleviating some of the stress in the rural economy and concentrating on measures to augment the flow of credit in the economy,” Chakravarty added.