India's GDP to remain flat at 7.2%: ICRA

The Dollar Business Bureau

India's GDP growth is likely to remain steady at 7.2% under gross value added (GVA) numbers during the first quarter (Q1) of FY 2017 slightly lesser to the growth at 7.4% in the same quarter previous fiscal, as per rating agency ICRA’s report. 

According to ICRA Senior Economist Aditi Nayar, the growth of industry at 7.1% in Q1 FY 2017 from 6.7% in Q1 FY 2016, would balance the de-growth of services and agriculture sectors. As a result, the growth of GVA at basic prices may remain flat at 7.2% in Q1 FY 2017. 

With pickup in industrial growth, real manufacturing would improve to roughly around 8% in Q1 FY 2017 from 7.3% in the same quarter last year. The growth in corporate earnings has been more than revenue growth, Nayar said. 

Moreover, growth of electricity generation increased to 9% in Q1 FY 2017 from 2.3% in corresponding quarter previous year. This is led by an upsurge in thermal electricity generation at 13% in Q1 FY 2017 when compared to just 1% in same period last year. 

The decrease in the capital goods output and the Union government’s capital expenditure would weigh upon increased formation of gross fixed capital in the recent quarter. ICRA believes the growth of agriculture, forestry and fishing may marginally come down to 2.2% in Q1 FY 2017 against 2.6% in same quarter a year ago. 

Service sector is likely to decline slightly at 8.5% in Q1 FY 2017 from 8.8% in corresponding period previous year. This is due to moderate growth in bank deposits, bank credit, and other main indicators of trade including air cargo and railway freight. 

ICRA expects that India’s GVA at basic prices will improve 50 bps to 7.7% in FY 2017. More consumption impulses will strengthen the country’s economic growth in the next few quarters. The good monsoon and kharif sowing coverage will enhance the agriculture productivity and rural demand.