Q2 GDP growth likely to slow to 7.5-7.6%, says SBI research report; data to be out on Friday

New Delhi: The GDP growth in the September quarter is expected to decelerate to 7.5-7.6 percent over the previous three-month period mainly due to a slowdown in rural demand, an SBI research report said on Monday. The GDP growth at constant prices (2011-12) was 8.2 percent in the April-June quarter of 2018-19. The Central Statistics Office (CSO) will be releasing the estimates for GDP growth for July-September on Friday.

The ‘SBI Ecowrap’ report said the SBI Composite Leading Indicator (CLI), a basket of 21 leading indicators for September quarter of the current fiscal, is showing a marginal declining trend. Consequently, the headline second quarter Gross Value Added (GVA) growth could be 7.3-7.4 percent, due to the slowing of rural demand, it said. “We also believe that the growth numbers in the second quarter will be helped by a weak base in September quarter 2017-18. “We estimate that the base impact on second-quarter GVA growth is around 30 bps. Based on tax collections, we subsequently expect second-quarter GDP growth at 7.5-7.6 percent,” said Ecowrap. It further said commercial vehicle sales, domestic air passenger traffic and cement production have maintained double-digit growth during the July-September quarter. All these indicators pushed up GVA in the quarter. The monthly data of various indicators for October 2018, however, suggest the GVA growth is slowing down due to a decline in demand, the report said. “Of particular concern, is that non-food credit, bank deposits and sale of passenger and commercial vehicles have slowed down as compared to previous month,” it said. Also with a slowdown in government spending in the second quarter, the fiscal impulses to growth would now be clearly missing, the report added.