Gross domestic product (GDP) numbers for the April-June 2017 quarter will be released later in the day today. Sandwiched between the government’s demonetisation programme and the implementation of the goods and services tax (GST), most experts expect the GDP
print to be around six per cent.
The economy clocked a 6.1 per cent growth rate in the January–March period — its lowest pace of growth in the past nine quarters, mainly due to demonetisation.
Here is a quick compilation of what the leading brokerages and research houses expect:
Repercussions of an early Budget and the newly implemented GST rates, receipts, and rebates are likely to distort upcoming GDP
readings. The gross value added (GVA) may be a more reliable measure of economic activity over the next few quarters. We expect GVA growth for the first quarter of financial year 2017-18 (Q1FY18) to come in at an improved but still soft 6.2 per cent and the GDP
a tad lower at six per cent.
We expect the GDP
growth for the first quarter of the ongoing financial year to stand at 6.5 per cent at constant 2011-12 prices. This growth is contingent on the realisation of GVA growth at 6.3 per cent.
The agriculture growth in this quarter would largely be the residual output of the rabi harvest, which was good last year. Crops account for around 60 per cent of the agriculture sector in GVA, while the balance comes from forestry, fishing, among other things. We expect agricultural growth to be 3.5-4 per cent during the quarter.
The construction segment of GVA is projected to grow at six per cent following the push by the government in terms of increased spending on infrastructure.
The disruption in production schedules and discounts offered ahead of the implementation of the GST; the impact of the appreciation of the INR relative to the USD on export earnings; and specific issues related to sectors such as banking and telecom are likely to weigh on the GVA growth in Q1FY2018, offsetting the impact of the up-fronting of the Central government’s expenditure and a healthy rabi harvest of several crops. We expect the GVA growth to decline to 6.3 per cent in Q1FY2018, from 7.6 per cent in Q1FY2017, while improving in sequential quarters, relative to the initial estimate of 5.6 per cent for Q4FY2017.
We forecast Q2 to be low (5.7%) and expect Q3 to be weak as well. PMI dropped heavily in July due to GST, so this could be a sign on the wall for Q3. Many analysts believe, however, that the negative GST effects are transitory in one month, but our take is that we’ll see GST disruptions beyond July as well, due to stalling working capital cycles and systemic failures to seize tax credits caused by incomplete digital filings of tax information by firms, which starts in September. Towards the end of the year, however, we believe growth will start to accelerate considerably.