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India's GDP growth to remain 'soft' at 6% in Apr-Jun quarter: HSBC

The GST tax regime could lead to uncertainties in tax collections, it added

Press Trust of India  |  New Delhi 

Steel, GDP growth, Q4
A worker cuts a metal pipe inside a steel furniture production factory in Ahmedabad

India's economic growth is likely to remain "soft" and the is expected to grow by 6 per cent in April-June, down from 6.1 per cent in the preceding quarter, says an HSBC report.

According to global financial services major, higher private consumption and spending is likely to be "dulled" by weak investment and growth over the quarter.


"Repercussions of an early budget and the newly implemented Goods and Services (GST) rates, receipts and rebates are likely to distort upcoming readings," it said.

The report said the Gross Value Added (GVA) may be a more reliable measure of economic activity over the next few quarters amidst policy changes like the episode (8th November 2016) followed by implementation (1st July 2017).

"Sandwiched between demonetisation, and other smaller policy changes, we recommend relying more on GVA as a measure of economic growth rather than GDP," it said.

"We expect GVA growth for the first quarter of this fiscal to come in at an improved but still soft 6.2 per cent, and a tad lower at 6 per cent," HSBC said in a research note.

The report said the Union budget was released on February 1, about a month in advance compared to previous years. This allowed for faster approvals and front loading of certain expenditure, particularly subsidies.

Besides, until the new system settles down, the regime could lead to uncertainties in collections, it added.

"We expect first quarter GVA growth to recover to 6.2 per cent y-o-y, from 5.6 per cent in the hit in the previous quarter," it said adding despite the improvement, growth is likely to remain soft. In fact growth has been falling singularly since mid-2016.

On the production side, agriculture and trade services are likely to be strong and manufacturing is likely to improve in line with IIP data. However, financial services is expected to remain depressed, it added.

First Published: Wed, August 30 2017. 14:22 IST
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