GDP growth: Today's Q2 numbers may disappoint

Growth in India's gross domestic product (GDP) this year is likely to be on the lower side of the 5.4-5.9 per cent predicted by the finance ministry in the Economic Survey.

Data for the financial year's second quarter (Q2, July to September) is to be issued on Friday. It might show the economy grew at barely five per cent or even less, according to at least one government official.

Several government officials, economists and experts Business Standard spoke to agreed that growth in the quarter would be much less than the 5.7 per cent in the April-June one. This would pull down the yearly growth to around 5.5 per cent, they said.

"All three components of GDP-agriculture, services and industry-are likely to show lower growth compared to the second quarter. I will be surprised if it exceeds five per cent in Q2," said a senior government official, who had analysed the data but cautioned he was not privy to the estimates to be released by the Central Statistical Office on Friday.

Despite a likely recovery in Q2 and Q3, the full-year growth was likely to be around 5.5 per cent, as estimated by the Reserve Bank of India, he added. For, industrial activity was yet to pick up and agricultural output would remain lower than last year.

Another official said growth higher than the 5.7 per cent in Q1 looked optimistic. It could only be around 5.2 per cent, as the other macro economic indicators were not hinting at a recovery.

"I expect the quarter's GDP growth to be about 5.2 per cent, on poor agricultural growth, and stagnant industrial growth," said D K Joshi, chief economist at CRISIL, a ratings agency.

Another ratings body, Moody's, was more optimistic and expected 5.3 per cent growth in July-September. It said the general elections in May helped lift investor sentiment and business confidence, though it would take a while before this translated into better performance in the real economy.

"Industry and agriculture may be the weakest and not show substantial growth. We expect July-September GDP growth to be 5.1-5.4 per cent," said Anis Chakravarty, senior director and chief economist of Deloitte in India. "We see a slight pick-up in Q3 and Q4, and if the next two quarters average between 5.6 and 5.7 per cent, then the overall growth will be above 5.5 per cent. Even if we are sub-six per cent for FY15, we will have shown an intent of higher growth."

Yet, even at five per cent, the Q2 growth will be better than the 4.8 per cent in the year-ago period. For 2013-14 as a whole, the growth rate was 4.7 per cent.

"Overall, we expect FY15 GDP growth to be around 5.9 per cent. We are expecting the economy to show a strong pick-up October onwards, on the assumption of lower inflation and higher external demand, which will boost the manufacturing and services sectors. My expectation is that the second quarter numbers will be weak, around five per cent but there will be improvement in the second half of the year," said N R Bhanumurthy of the National Institute of Public Finance and Policy.

She added that on the data coming from states so far, it seemed the area under cultivation had not been dramatically affected by the lesser monsoon rain.