Experts see Q2 growth at sub-5%

While Moody's pegged it at 4.5%, Deutsche Bank expects it to grow by 5.5%

The economy may have continued its sluggish run during the quarter ended September 2013, with many economists predicting sub-five per cent growth for the fourth consecutive quarter. Data on gross domestic product (GDP) for the September quarter are slated to be released on Friday.

Various economists and analysts have pegged GDP growth during the September quarter at 4.5-4.8 per cent.

“Some pickup in industrial activity, along with support from the farm sector, may lead to growth higher than that observed in the previous quarter,” said D K Joshi, chief economist at CRISIL.

Joshi, who expects GDP to have grown 4.7 per cent during the second quarter, estimates growth in the agricultural sector at 4.5 per cent. “Looking at a lower base, this is not that good a figure,” he says. In the corresponding quarter last year, the sector had grown just 1.7 per cent.



Aditi Nayar, senior economist at Icra Ratings, said the true impact of the agricultural sector would only be seen in the third quarter. She projects farm sector growth in the September quarter at 3.8 per cent. “Kharif crops are usually harvested in October, and the major benefit to agricultural growth following the healthy monsoon in 2013 would be seen in the quarter ending December.”

Typically, the share of farm output to GDP was the least in the second quarter and the highest in the third quarter, she said. However, the good rains might have had some beneficial impact on horticulture, livestock, fisheries, etc, in quarter ended September, too, she added.

Nayar pegged GDP growth in the September quarter at 4.6 per cent.

Madan Sabnavis, chief economist, CARE Ratings, said economic growth during the quarter would stand at 4.8 per cent. “This would come on the back of government spending in this phase, reflected in the staggering fiscal deficit numbers,” he said, adding he expected the social and personal spending segment of the services sector to increase 8.4 per cent in the second quarter, and the overall services sector to grow 6.2 per cent. “This is, however, quite low compared to the traditional growth of eight per cent in the sector,” Sabnavis said.



From here, services sector growth would deteriorate further, with a cut in government spending in the coming quarter, he said. “Unless there is no compensation for sub-sectors, there will be no upturn in the sector.”

Economists said though there was a slight revival in the demand, the improvement on the investment front wasn’t substantial. Moody’s Analytics pegged GDP growth in the September quarter at 4.5 per cent. The research wing of Moody’s Group said, “GDP growth in the second quarter cooled to its slowest pace in four years, as production slowed across most parts of the economy.” It attributed the sluggish numbers to a continued bleak performance in manufacturing and construction. It added during the September quarter, the slowdown had gripped the services sector, too.

Deutsche Bank, however, remained bullish on the economy, estimating GDP growth at 5.5 per cent for the September quarter, primarily due to better industrial performance and higher agricultural income during this period. “While expectations remain poor, we estimate real GDP grew 5.5 per cent during the quarter, the best performance in a year,” the global banking and financial services firm had said in a note.

According to the bank, there was a modest revival in the industrial and construction sectors, finance and trade looked buoyant and public spending had picked up. “Factoring in these inputs, we estimate industrial sector to have grown 1.8 per cent in the September quarter, against (-) 0.9 per cent growth in the previous quarter,” said the Deutsche Bank note.

The bank predicted the services sector, which had the largest share in GDP, grew seven per cent in April-September, while the non-farm sector expanded 5.9 per cent during this period. Despite talking of a healthy agricultural performance, the bank pegged farm sector growth at a mere two per cent.

In 2012-13, India’s GDP grew at a decade-low of five per cent, with the last two quarters seeing sub-five per cent growth. In the first quarter of this financial year, the economy expanded at a four-year low of 4.4 per cent. The finance ministry had expected the economy to record higher growth in the September quarter compared to the previous quarter, but had said a real pick-up would only be seen from the second half of this financial year.