Why economists watered down India's July-Sept growth estimate to 4.2-4.7%

How low could Q2 FY20 growth really be? An SBI Research Report puts the number at a dismal 4.2%.

A severe contraction in factory output has prompted observers of the Indian economy to downsize their GDP estimates. Most have put the headline number at 4.2-4.7 per cent. 

September saw the manufacturing sector, which makes up 78 per cent of the index, slow down at a faster pace. Industrial output in September contracted by 4.3 per cent for the second straight month, falling to an eight-year low. But this time around, service sector activity too has pulled down growth in Q2, economists said. 

State Bank of India (SBI) joins global agencies such as the ADB, World Bank, OECD, RBI and the IMF in downgrading India's FY20 growth rates.

According to India’s largest public sector bank, India’s GDP growth will slow down further in the second quarter (July to August) after it hit a six-year low of 5% in the first quarter (April to June) of the current financial year. For the full fiscal year, it has given the lowest estimate so far, at 5 per cent. Nomura chief economist Sonal Varma has put the Q2 growth at 4.2 per cent, similar to what SBI has estimated.

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