India continues to report over 7 per cent GDP growth, but its momentum has weakened and the country’s growth is well “below trend”, says a Deutsche Bank report.
According to the global financial services major, India’s GDP and gross value added (GVA) grew by 7.3 per cent and 7.1 per cent, respectively in October-December 2015, reflecting a slowing growth momentum from the first half of this fiscal.
“India’s growth is well below trend, irrespective of the over 7 per cent growth reported as per the national accounts data,” Deutsche Bank said in a research note.
According to data of the Central Statistics Office (CSO), the economy is expected to grow at a 5-year high of 7.6 per cent in the current fiscal.
The CSO data showed that the economy grew at 7.6 per cent in the first quarter, 7.7 per cent in second and 7.3 per cent in third.
“We find it difficult to make sense of the current GDP data, with ground reality and high frequency indicators such as IP, PMI, CMIE capex, business and employment surveys indicating a much weaker cycle,” the report added.
It noted that though growth momentum has slowed in the second half of this fiscal year and that investment recovery remains anemic, support to growth is mainly coming from private consumption and this is likely to be the growth driver going forward as well.
“We maintain our GVA growth forecast for FY16 at 7.3 per cent, while raising the GDP forecast to 7.5 per cent...,” the report said, adding “we are however not changing our FY17 GDP growth forecast of 7.5 per cent, which in our view is subject to downside risks.”
The global brokerage firm said RBI will consider all the nuances in the national accounts data and will find enough justification to cut rates, once the Union Budget is out of the way in end-February.