Economists estimate GDP growth of 5.5-6% in Q1 FY20 amid slowdown

Amid slowdown in various sectors, experts believe the Indian economy has grown by 5.5-6 per cent in the first quarter (Q1) of the current financial year (2019-20 or FY20).

The lower range of these projections means the economy has slowed further. In the fourth quarter (Q4) of 2018-19 (FY19), it had grown 5.8 per cent. The higher range points to a slight recovery.

Growth was at a 20-quarter low in Q4FY19. GDP numbers for Q1FY20 are scheduled to be released on August 30.

“Momentum has not picked up yet. The NBFC (non-banking financial companies) crisis as well as weak performance in the airline and telecom sectors could put pressure on services. Industry indicators, on the other hand, are very clearly looking south,” said D K Joshi, chief economist at Crisil.

Though there is a slight uptick in the fast-moving consumer goods (FMCG) sector, aggregate consumption has been pulled down by automobiles, said Pronab Sen, former chief statistician.

“Government spending, whose contribution is critical in times of slowdown, has not performed well in Q1,” he added.

Economists' estimate for GDP growth for Q1 FY20

Sen pegged economic growth at most at 5.5 per cent, the lowest among those that Business Standard spoke to.

Late monsoon delayed the crop cycle this year, and nothing great can be expected from the farm sector, he also said.

Total money spent by the central government grew only 2 per cent in Q1FY20.

Aditi Nayar, principal economist at ICRA, said exports and private investments remain tempered, although government spending may gather momentum in later quarters.

Soumya Kanti Ghosh, chief economic advisor at SBI group who tracks 33 leading indicators, said only nine were showing acceleration compared to the March, when 17 did so.

His projection is 5.6 per cent growth rate for Q1FY20, with a downward bias.

Some of the indicators tracked by Ghosh are domestic passenger vehicles, petroleum and diesel consumption, telecom subscribers, consumer credit, rural agri wages, tractor sales, freight traffic, capital goods and government capex.

Pegging growth at 5.5 per cent in the first quarter of FY20, Shubhada Rao, chief economist at YES Bank, attributed this to further deceleration across the board.

“While a slowing consumption is getting reflected in high frequency indicators, investments may have paused before the elections -- in a wait and watch mode," she said. Election results, showing a massive victory for BJP, were declared on May 23 when over half of the quarter was over.

Mild industrial expansion in Q1FY20, subdued earnings in several sectors, muted central government expenditure prior to the presentation of the Union Budget, and unfavourable Rabi harvest suggest gross domestic product (GDP) growth may print at 6 per cent, said Nayar.
 

Volume indicators on industrial and investment activity were slightly better for a better part of the June quarter than the previous one, especially April and May. The Index of Industrial Production (IIP) for manufacturing grew faster than the March quarter (Q4FY19), data shows.

An indicator of investment, growth IIP for capital goods, went in positive for the first two months of Q1FY20. However, it contracted in June at a rate of 6.5 per cent. Production in core industries grew slowest in four years in this month.

With regard to demand, auto sales contracted by 12.3 per cent in the first quarter of FY20 over the previous quarter.

Indranil Pan, chief economist at IDFC First Bank, said his hunch was growth would be stabilising at 5.8 per cent in the first quarter of FY20. He said a significant downturn was not witnessed in agriculture in the quarter and one has to rather watch the second quarter numbers more carefully as the economy may not recover before the third quarter of the current financial year.

D K Srivastav, chief policy advisor at EY India, said, “Several sectors have seen significant slowdown. IIP is also down.”

He said the economy would recover only from the fourth quarter.

In its latest monetary review, the Reserve Bank of India had cut its economic growth projections to 5.8-6.6 per cent in the first half of FY20 from earlier 6.4-6.7. It had also lowered the growth projections to 6.9 per cent from 7 per cent for the entire FY20.