Services, industrials to lift Q3 GVA print to 6.8%; GDP to improve to around 7.5% in fourth quarter: Icra

Mumbai: After a muted first half, the gross value added (GVA) growth is likely to improve to 6.8 percent in the third quarter, helped by an improvement in the services and industrial sectors, says a report. In the second quarter, GVA growth was at 6.1 percent. “We expect GVA growth at basic prices in year-on-year terms to print a sequential recovery of 6.8 percent in third quarter led by the services (at 8.8 percent from 7.1 percent) and industry (at 6.8 percent from 5.8 percent), even as growth of agriculture, forestry and fishing (to 1.5 percent from 1.7 percent) is likely to ease,” Icra said in a report on Monday. [caption id=“attachment_4368147” align=“alignleft” width=“380”] Representational image.[/caption] Headline GVA growth in the third quarter is likely to mildly exceed 6.7 percent printed a year-ago. During the first half of this fiscal, economic activity remained muted, partly on account of the structural transition to goods and services tax (GST), but signs of a pick-up in growth are starting to appear. The rating agency’s principal economist Aditi Nayar said higher growth in volumes in manufacturing and some of the services sub-sectors and in the government’s expenditure, a favourable base effect and an improvement in corporate earnings are expected to contribute to a sequential recovery in the y-o-y growth of GVA at basic prices in the third quarter. Growth in the services sector is likely to record a base-effect led pick-up to nearly 8.8 percent in Q3 from 7.1 percent in Q2, reflecting the improvement recorded by indicators such as bank credit, cargo handled at major ports, passengers carried by domestic airlines and foreign tourist arrivals. A favourable base effect would continue to support volume growth in sectors such as manufacturing, construction, trade, hotels, transport, communication and services related to broadcasting, and financial, real estate and professional services in the fourth quarter, the report said. The rating agency expects GDP and GVA growth to improve to around 7.5 percent in the fourth quarter. Notwithstanding an expected pick-up in H2, Icra expects GVA growth to ease to 6.5 percent in FY18 from 7.1 percent in FY17, while GDP growth is expected to decline to 6.7 percent in FY18 from 7.1 percent in FY17.