HDFC Bank pegs FY19 GDP growth at 7.3% on private consumption, capex

Economic growth is on a northward move as the twin impacts of the note-ban and GST implementation wane, and will accelerate to 7.3 per cent next fiscal from 6.5 per cent this year, a says a report.

Improvement in private consumption, increase in capacity utilisation and private capex cycle revival will be driving higher growth,a report by HDFC Bank's economists said.

"We are optimistic about the growth outlook in FY19 as the recovery gains momentum and the effects of the note-ban shock and GST related disruptions fade...We expect growth to pick up to 7.3 per cent in FY19 from 6.5 per cent in FY18," its chief economist Abheek Barua said today, estimating the December quarter growth print to come at 6.9 per cent.

Real GDP growth will move upward to 7.2 per cent in the last fiscal of 2017-18, it said. It can be noted that growth had slipped to a three-year low of 5.7 per cent for the first quarter and climbed up to 6.3 per cent in the succeeding three months.

The report said there will be a slowdown in the agricultural sector growth, but it will be compensated by a faster srge in industries and services sectors.

As the impact of GST rollout fades, the industrial sector, especially manufacturing, will see a rebound in activity, he said.

An uptick is expected on the services front as well on factors like a favourable base effect, recovery in most of the lead indicators like deposit and credit for banks, cargo handled at major ports, passengers carried by domestic airlines and foreign tourist arrivals, he said.

Agri growth, however, will be tepid at 1.5 per cent for the third quarter because of a 2.8 per cent dip in Kharif crop output, a lag in area under Rabi cultivation and an unfavourable base effect, it said.

However, agriculture growth will accelerate to up to 4 per cent in 2018-19 on a favourable base and assuming a normal monsoon, Barua said.

Rising farm output, coupled with higher minimum support prices announced by government are likely to improve farm incomes and rural consumption, it said.