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GDP growth at 5% under old series; Niti Aayog hopes for 7.5% in Q2

Terming The Q1 GDP Growth Of 5.7 Per Cent As Disappointing, A Slew Of Foreign Brokerages Today Cut Their Full-year Forecast To Well Under The 7 Per Cent Being Targeted By Government.

News Nation Bureau | Edited By : Arshi Aggarwal | Updated on: 01 Sep 2017, 07:34:27 PM
GDP growth at 5% under old series; Niti Aayog hopes for 7.5% in Q2

New Delhi:

Terming the Q1 GDP growth of 5.7 per cent as disappointing, a slew of foreign brokerages today cut their full-year forecast to well under the 7 per cent being targeted by Government.

It raises the likelihood of the Reserve Bank delivering a growth-propping rate cut later this year, some analysts said.

Analysts at HSBC said the numbers disappoint on a “myriad of factors” and attributed the slip to GST related destocking, auto-correction in growth prints as prices normalize, rupee appreciation, weaker agriculture and higher subsidy payout.

Bank of America Merill Lynch (BofAML) said the GDP growth is “about 5 per cent”, which is much below the 7 per cent potential under the old series of computation. It also cut its GVA growth forecast to 6.9 per cent from the earlier 7.2 per cent.

Read | Jaitley admits slump in GDP a matter of concern, hopes for domestic public investment in near future

Stating that the RBI may go for a rate cut at the December review of the policy, BofAML said, “Although inflation is turning up to 3.1 per cent in August on rising tomato and onion prices and 4.6-4.9 per cent in 1H18, it is still well within the RBI’s 2-6 per cent inflation target.”

HSBC said there are “downward risks” to its growth forecast of 7.1 per cent, while Japanese brokerage Nomura cut its calendar 2017 forecast by 0.20 per cent to 6.7 per cent.

“The key question is how soon the economy will recover from the GST-led disruptions,” Nomura said. The brokerage, however, said that the RBI will hold rates.

Analysts at Morgan Stanley said they continue to see a recovery, but the data release poses downward risks to its growth forecasts.

“The key risks to the outlook are the impact of weaker monsoon on agricultural output; the pace of NPL resolution, which would affect credit growth;and private capex and global trade conditions,” it said.

India’s GDP grew slower at 5.7 per cent during April-June—the lowest in three years of the Modi government while lagging China for the second straight quarter—as manufacturing slowed ahead of the GST launch and note ban impact lingered.

Gross domestic product (GDP) growth in the first quarter of 2017-18 was lower than 6.1 per cent of the preceding one and 7.9 per cent in the same period last fiscal.

China recorded 6.9 per cent growth in January-March as well as April-June quarters.

Read | GDP growth slips to 5.7 per cent in April-June quarter from 6.1 per cent in January-March

Expressing concern on the GDP numbers, Finance Minister Arun Jaitley said manufacturing growth rate seems to have bottomed out as GST has been implemented and destocking of pre-GST stocks is almost complete.

Niti Aayog’s new Vice-Chairman predicts 7-7.5 per cent GDP growth in second quarter 

Economic growth in the second quarter (July-September) of 2017-18 is expected to soar to 7-7.5 per cent on the back of good monsoon and clarity over GST, Niti Aayog’s new Vice-Chairman Rajiv Kumar said on Friday.

India’s GDP growth rate slid to a 3-year low of 5.7 per cent in the first quarter (April-June), mainly on account of a slump in manufacturing.

“I am confident that in the July-September quarter, economy will grow by 7-7.5 per cent. Destocking, which was in anticipation of GST rollout, has completed and now, there is more clarity on the new tax regime,” said Kumar, who took over as Vice-Chairman today replacing Arvind Panagariya. “Also, monsoon is good. Many IPOs are in the offing. FDI and FIIs are also increasing.”

The noted economist, however, cautioned against taking the June quarter growth blip as a trend.

On the effect of demonetisation, he held that it impacted growth in the first quarter as by then the currency shortage triggered by the scrapping of Rs 500 and Rs 1,000 notes on November 9 last year was over.

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First Published : 01 Sep 2017, 07:34:27 PM