A new research report from DBS suggests that India’s GDP growth for the first quarter of 2016 (January to March) is likely to be around 7.1 per cent. The report says India is doing relatively well despite challenging conditions around the world, but, there are some domestic sectors which have remained weak. Stressed banking sector and slow private sector capex spending are also expected to weigh on the growth potential of the Indian economy in 2016.
“1Q16 (January-March) GDP growth report out on Tuesday is likely to see gross-value added (GVA) growth at 7.1 per cent Y-o-Y (final quarter of fiscal year 15/16) steady from quarter before,” DBS commented in the research note.
“Much thereby hinges on the stimulatory impact from a normal monsoon and pay commission changes, which is expected to help the rural sector also bolster consumption demand and overall growth,” the report noted.
Services sector is expected to remain strong and compensate for weaker agricultural output and subpar industrial growth.
“The services sector is expected to pick most of the slack for the quarter, lifted by public capex spending,” the DBS report noted.
According to the report, some of the service indicators such as service sector PMIs and visitor arrivals are positive. Auto sales have been strong and, while recent macro indicators specially infrastructure industries growth have been positive.
India’s first quarter GDP figures will be released on Tuesday. The GDP is expected to strengthen, following nice support from higher net taxes. According to DBS, higher net taxes will help lift real GDP to 7.5 percent on year compared to 7.3 percent in 4Q15.
Experts believe private capital investments will stay calm, although urban consumption is expected to grow further. Net exports are also expected to be flat-to-negative in the first quarter of 2016.
Increase in electricity generation is likely to improve industrial sector, but manufacturing and mining sectors may limit the upside. According to the report, GDP manufacturing output increased 12.6 percent y/y in fourth quarter of 2015.
US rating agency Fitch has also stated in its latest Global Economic outlook that India’s GDP is likely to grow 7.5 percent in the first quarter of 2016, and could also demonstrate 7.7 percent growth in second quarter of 2016.
According to the UN’s mid-2016 report on the World Economic Situation and Prospects that was released in early May, Indian economy may grow by 7.3 percent in 2016 and 7.5 percent in 2017. This will be despite the drought affecting 10 states and about 330 million people in the country.
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