The progress of the economy in the first quarter of the year is partly known in terms of information on aspects of industrial production, government activity, and banking. Growth in other components of India GDP like agriculture, construction, trade, transportation etc., is still unclear and while some of these elements are associated with industry and government expenditure, past trends in linkages are nebulous. Based on proxy indicators available Care Ratings presents its expectations on GDP growth for the first quarter of the year.
Care Ratings expects the GDP growth for the first quarter of ongoing fiscal year i.e. FY18 at 6.5% at constant 2011-12 prices. This growth is contingent on realization of Gross Value Added (GVA) growth at 6.3%.
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% of agriculture sector in GVA while the balance comes from forestry, fishing etc. “We expect agricultural growth to be 3.5-4% during the quarter.”
IIP growth for April to June quarter is positive at 1.25%. We expect growth in value added in manufacturing in Q1-FY18 at 4.5-5%. Production has been affected by substantial destocking activities undertaken by the manufacturers ahead of Goods and Services Tax (GST) implementation.
Growth in electricity would be around 7% and mining around 2-3%.
Construction segment of GVA is projected to grow at 6% following the push by the government in terms of increased spending on infrastructure.
For trade, hotel and transport etc. segment of GVA we expect GVA of trade, hotels, and transport to grow at around 7% with prospective GST impacting services to a limited extent. Trade growth was largely stable while that of transport and hotels etc. was affected by lower growth in output.
In finance, real estate, and professional services sector of GVA, the real estate and professional services account for 70% share. Though the banking services witnessed some uptick in last quarter, the real estate sector growth has been sluggish. This is due to the implementation of Real Estate (Regulation and Development) Act, 2016 (RERA) having some impact. We expect growth of around 6.5% for the first quarter of FY18.
Public administration, defence etc. is expected to grow at the fastest rate among all the segments at 12% on account of government spending push at the beginning of the financial year wherein 80% of the budgeted fiscal space has already been exhausted.