 "First quarter GDP growth likely to beat expectations")
The Indian economy’s growth rate is still below potential, reckons RBI Governor Raghuram Rajan, days ahead of stepping down. The data for the economy’s performance in the first quarter of 2016-17 to be released on Wednesday will tell if he is right again. The Indian economy grew 7.6 per cent in 2015-16; on a sequential basis the last quarter of the year logged a growth rate of 7.9 per cent.
Among those who are sure the actual growth is edging close to the potential is Arvind Panagariya, deputy chairman of Niti Aayog. Panagariya has told The Economic Times that he expects the average for the year to “cross 8 per cent because I see nothing that takes away from what we had last year”.
The data points for this year till date are definitely more robust than at the same time last year. Core sector growth rate has risen by 5.4 per cent for the first quarter of this financial year. It was 2.1 per cent in the same period last year. Since the measurement rod used by the other lead indicator, the index of industrial production is now pretty much askew compared to the GDP rod, the core data serves better.
For the same set of reasons, Goldman Sachs estimates the growth for the quarter to show 7.8 per cent. It includes among the positives, favourable fiscal and monetary policies, passage of key reforms including GST and continued rise in the pace of foreign direct investment. It expects the year to close out at 7.9 per cent.
In fact unlike last year when most agencies had begun to clip off their expectations of growth rate as monsoons had weakened and Chinese gyrations increased, it has reversed. India Ratings and Research has for instance, revised its forecast for the year to 7.8 per cent, a shade more than its earlier forecast of 7.7 per cent.
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The baseline note of caution comes from RBI which has retained the gross value added projection for the year at 7.6 per cent “with risks facing the economy at this juncture evenly balanced around it”. Released earlier this year the government’s Economic Survey has projected the rate for the year at close to 7.75 per cent but this is likely to be revised in the mid-year review.
Joining the RBI on the same circumspect note is the Reuters poll data. “India's economic growth likely lost some momentum in the April-June quarter on cutbacks in domestic and global demand”, it argues. The key concern there is the continued slump in exports which fell consecutively for 18 months till it reversed in June. Moody’s Investors Services is the most pessimistic retaining the annual average at 7.5 per cent.
The first quarter figures will not be able to factor in the sharp improvement in the monsoon after two drought years as well as the impact of the higher pay for the central government employees which gets released only now.
A Business Standard report also shows net profit for around 1,600 companies, excluding the financial and oil & gas sectors was up 11.7 per cent year on year but down from 79 per cent from the preceding quarter. Remember the new GDP data puts more bias towards profits and so net sales despite being up 6.4 per cent year-on-year, during the first quarter, “growing at the fastest pace in the last six quarters” might not be enough, just yet.
A Business Standard report also shows net profit for around 1,600 companies, excluding the financial and oil & gas sectors was up 11.7 per cent year on year but down from 79 per cent from the preceding quarter. Remember the new GDP data puts more bias towards profits and so net sales despite being up 6.4 per cent year-on-year, during the first quarter, “growing at the fastest pace in the last six quarters” might not be enough, just yet.