We expect India’s gross value added or GVA growth to come in at about 6.2% for 1QFY18 while gross domestic product or GDP is likely to register 6.6% growth. This reading is likely to be higher than 5.6% GVA and 6.1% GDP growth registered in 4QFY17, but we believe the serial shocks of demonetisation followed by the implementation of Goods and Services Tax or GST is weighing on the economy. Please read our earlier report: India Macro Meter: Economy feeling the pinch of GST implementation. We expect agricultural growth to be robust, but it is likely to be lower than that of the previous quarter, while industry is likely to witness a slowdown reflecting the impact of implementation of GST. Lead indicators suggest an uptick in the service sector activity, although the key driver of growth will be government spending. We expect a strong pick-up in activity in 2HFY18 as the shocks of demonetisation and GST fade away slowly.
6.2% GVA growth and 6.6% GDP growth likely in 1QFY18: We expect India’s GVA growth to come in at about 6.2% in 1QFY18. GDP growth, which includes the impact of indirect taxes, is likely to come in at about 6.6%, as indirect tax growth at the Central government level indicates robustness. Indirect tax collections grew 15.3% YoY in 1QFY18, which was not significantly different from 15.5% registered in 4QFY17. This reading is likely to be higher than the 5.6% GVA and 6.1% GDP growth registered in 4QFY17, but we believe the serial shocks of demonetisation followed by the implementation of GST is weighing on the economy.
Industry likely to reflect the impact of GST implementation: We expect agricultural growth to be robust at about 3.7% YoY, but it is likely to be lower than that of the previous quarter. Industry is likely to witness a slowdown reflecting the implementation of GST. Manufacturing sector activity, as measured by the Index of Industrial Production or IIP grew 1.8% YoY in 1QFY18, only a tad lower than 2.1% in the previous quarter, but corporate sector activity was also adversely impacted by destocking ahead of the rollout of GST. IIP – mining posted a sharp slowdown, rising just 1.3% YoY in 1QFY18 which is down from 7.8% in the previous quarter. Electricity production rose 5.3%YoY in 1QFY18, up from 4.2% in the previous quarter.
Service sector witnesses an uptick; growth will be led by government expenditure: We expect the service sector’s growth (including construction) to rebound to 7.6% YoY from 5.7% in the previous quarter. The construction sector is likely to witness a slight uptick after 3.7% YoY decline in the previous quarter. However, government spending is likely to lead growth, contributing about 2.4 percentage points to GVA growth. Central government expenditure rose 32.9% YoY in 1QFY18, as expenditure was front-loaded. Lead indicators for the trade, hotels, transport and communication segment, and real estate and financial services segment also indicate some improvement in activity from the previous quarter.
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Founded in 1986 by Nirmal Bang, the Nirmal Bang is recognized as one of the largest retail broking houses in India, providing an array of financial products and services. Their retail and institutional clients have access to products such as equities, derivatives, commodities, currency derivatives, mutual funds, IPOs, insurance, depository services and PMS. The Group is headed by Mr. Dilip Bang and Mr. Kishore Bang.
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