Indian Economy Poised to Pick up After Five Quarters of Decline

India’s GDP is expected to grow at 6.4 percent during the quarter, compared to 5.7 percent in June-ended quarter.

India’s gross domestic product is expected to grow at 6.4 percent during the quarter, compared to 5.7 percent in the June-ended quarter.

(Photo: iStock)

Economic activity in India is likely to pick up after five straight quarters of slowdown as the adverse impact of the Goods and Services Tax and demonetisation fades.

India’s gross value added growth in the quarter-ended September is likely to grow at 6.2 percent from a three-year low of 5.6 percent in the previous quarter, a Bloomberg poll of 46 economists showed.

GVA growth has become a preferred measure of economic growth as it strips out the impact of indirect taxes and subsidies.

Quarterly GVA growth at basic prices(Photo: BloombergQuint)

The country’s gross domestic product, a more commonly used measure, is expected to grow at 6.4 percent during the quarter, compared to 5.7 percent in the June-ended quarter.

The government will release the September quarter growth numbers at 5:30 pm on 30 November.

Quarterly GDP Growth(Photo: BloombergQuint)

The improvement will come as a relief for Prime Minister Narendra Modi's administration which has been grappling with slowing growth, stagnant private investments, a pile-up of bad loans, shrinking exports and the risk of missing its fiscal deficit target.

Consumption demand in urban and rural areas have improved along with an increase in the indicators of private investment demand, Japanese brokerage and investment firm Nomura said in a research note. On the supply side too, there has been a pick-up in industrial output growth during the quarter, it added.

Restocking after GST will benefit the manufacturing sector and continuing remonetisation will be positive for a lot of private sector services like construction and trade transportation. So more of private sector driven recovery is what we are expecting.

Sonal Verma, Chief India Economist, Nomura To BloombergQuint

The slowdown in the economy due to the twin shocks of demonetisation and GST “seems to be bottoming out”, the Federation of Indian Chambers of Commerce and Industry said in its economic outlook.

Growth is expected to take-off from here with a recovery in the private sector capital expenditure underway from 2018, according to Morgan Stanley. It expects real GDP growth in India to accelerate to 7.5 percent in 2018 and 7.7 percent in 2019. “With the headwinds abating, we expect that the economy now has a clear runway for growth, with consumption and exports picking up,” it added.

(This article was originally published on BloombergQuint)

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