GDP growth for July-Sept may dip to 7.2% on sluggish economy: Icra report

After the strong upswing in the April-June quarter, GDP growth for July-September is expected to dip to 7.2 per cent due to sluggishness in agriculture and industry, a report said Tuesday.

It can be noted that the GDP had grown by a higher than expected 8.2 per cent in the first quarter of the financial year as compared to the year-ago period. Official data on quarterly growth will be released at the end of this month.

The dip in the growth number will be largely on account of a pull down from industry where growth is expected to slow down to 7.1 per cent in the September quarter as compared to 10.3 per cent in June and the farm sector, which may slow down to 3.5 per cent from 5.3 per cent, domestic rating agency Icra said in a report.

Higher fuel prices and the weak rupee were pointed out as the primary factors dragging the industrial growth, while an uneven and sub-par monsoon, flooding in some areas amid a late withdrawal of the monsoon rains, and instances of crop damage and pest attacks will impact the farm sector.

Its principal economist Aditi Nayar said pre-tax margins for companies have declined on a quarter-on-quarter basis because of a rise in the input and energy costs and the rupee depreciation.

"Overall, we expect manufacturing GVA (gross value added) growth to ease to 7.0 per cent in Q2FY19 from the healthy 13.5 per cent expansion in Q1FY19," she said.

The agency said higher commodity prices may support a shallow recovery in GVA growth in mining and quarrying from the marginal 0.1 per cent in Q1FY19 to around 2.5 per cent in Q2FY19, despite a slowdown in volume growth.

Similarly, electricity, gas, water supply and other utility services and construction activity will also show an upswing due to a variety of sectoral factors, it said.

On agriculture, the agency said the first advance estimates of crop production indicated a decline in kharif output in FY2019 for pulses, coarse cereals, and cotton, and a rise in oilseeds, sugarcane and rice.

The services sector growth is expected to rebound to 7.8 per cent for the September quarter from the 7.3 per cent in the first quarter, led by a sharp pickup in the expansion in the Centre's non-interest revenue expenditure and a mild rise in growth of bank deposits.