Sept quarter GDP growth may slow to 7.5-7.6% as rural demand declines: SBI

GDP growth at constant prices was 8.2% in the April-June quarter of 2018-19

The GDP growth in the September quarter is expected to decelerate to 7.5-7.6 per cent over the previous three-month period mainly due to a slowdown in rural demand, an SBI research report said on Monday. 

The GDP growth at constant prices (2011-12) was 8.2 per cent in the April-June quarter of 2018-19. 

The Central Statistics Office (CSO) will be releasing the estimates for GDP growth for July-September on Friday.

The 'SBI Ecowrap' report said the SBI Composite Leading Indicator (CLI), a basket of 21 leading indicators for September quarter of the current fiscal, is showing a marginal declining trend.

Consequently, the headline second quarter Gross Value Added (GVA) growth could be 7.3-7.4 per cent, due to the slowing of rural demand, it said.

"We also believe that the growth numbers in the second quarter will be helped by a weak base in September quarter 2017-18."

"We estimate that the base impact on second quarter GVA growth is around 30 bps. Based on tax collections, we subsequently expect second quarter GDP growth at 7.5-7.6 per cent," said Ecowrap.
 

It further said commercial vehicle sales, domestic air passenger traffic and cement production have maintained double-digit growth during July-September quarter. All these indicators pushed up GVA in the quarter.

The monthly data of various indicators for October 2018, however, suggest the GVA growth is slowing down due to a decline in demand, the report said.
 

"Of particular concern, is that non-food credit, bank deposits and sale of passenger and commercial vehicles have slowed down as compared to previous month," it said.

Also with a slowdown in government spending in the second quarter, the fiscal impulses to growth would now be clearly missing, the report added.