Economists' expectations of GDP growth: From 6.1% to 6.7% for Q1

The economy is likely to expand in the range 6.1-6.7 per cent in the first quarter (Q1) of the current financial year (FY18), largely on the back of agriculture and government expenditure, against 6.1 per cent in the fourth quarter (Q4) of the previous financial year (FY17).

Icra expects gross domestic product (GDP) to rise 6.1 per cent in Q1 of FY18, the same rate as in Q4 of 2016-17, says its Principal Economist Aditi Nayar. 

However, she expects gross value added (GVA), the summation of agriculture, industry, and services, to grow by 6.3 per cent due to a sharp increase in the government’s subsidies in the just-concluded quarter because of front-.,loading expenditure.

GDP is GVA plus indirect taxes minus subsidies.

Nayar says she expects modest growth because of the disruption in production schedules and discounts offered ahead of the introduction of the goods and services tax (GST); the impact of the appreciation of the rupee relative to the dollar on export earnings; and issues related to sectors such as banking and telecom. These would offset the impact of upfronting the government’s expenditure and a healthy rabi harvest of several crops.

“Icra estimates the growth of GVA at basic prices, excluding agriculture, forestry and fishing, and public administration, defence and other services, at 4.8 per cent in Q1, in line with the modest 4.8 per cent rise in gross corporate income tax collections,” Nayar adds.

Madan Sabnavis of CARE Ratings pegs GDP growth in Q1 at 6.5-6.7 per cent, and says industrial production and the financial sector were subdued during the period partly due to GST-related problems.

If the industrial sector expanded, he expects the growth rate to rise in the remaining quarters to reach 7.6-7.8 per cent for 2017-18. If the secondary sector remained muted, growth might be 7-7.2 per cent, he said.

Volume One of Economic Survey had pegged GDP growth at 6.75-7.5 per cent. However, its recently published Volume Two was not optimistic about reaching the upper end of the band. 

D K Pant of India Ratings & Research projects GDP to grow by 6.6 per cent in the first quarter of 2017-18. However, unlike Nayar, he expects GDP growth to be higher than GVA rise, which, he says, will be 6.4 per cent. 

He expects a bit higher consumption in Q1 than in Q4 of 2016-17, high government expenditure, and expected growth in gross capital formation by 2.8 per cent, against the contraction of 2.2 per cent in Q4.

The GDP data for the first quarter are expected by the end of this month.