Q4 Gross Value Added growth in India to drop to 6.6%: D&B

Weak investment activity, as reflected in the slow output growth in capital goods and infrastructure, is likely to depress Indian gross value added (GVA) growth to around 6.6 per cent in the fourth quarter ended March, US consultants Dun & Bradstreet (D&B) said on Tuesday.

"GVA in Q4 FY17 to remain subdued at 6.6 per cent y/y (year-on-year)," D&B said in a report on the Indian economy.

GVA, as opposed to gross domestic product (GDP), is regarded as a better reflection of productivity, as it excludes the indirect taxes.

"Weak investment activity as reflected in the subdued capital goods and infrastructure/construction sector output growth is likely to restrain growth," the American agency said.

D&B expects the Index of Industrial Production (IIP) to remain weak and grow by only around 3-3.5 per cent during April 2017.

"The transition to GST (Goods and Services Tax) is also likely to create some disruption and impact the short-term sales volume across businesses," the report added.

According to D&B, the excess liquidity in the banking system post-demonetisation along with elevated global commodity prices and increase in house rent allowance under the 7th Pay Commission would continue to provide upward pressure to prices.

"The traction in the capital goods sector remains elusive and the downtrend in the intermediate goods and consumer goods sector poses concern on the pace of revival of the IIP during the course of the year," said D&B Lead Economist Arun Singh.

"While the informal segment of the services sector has been impacted by demonetisation, the formal sector faces headwinds from the protectionist policies from the US," he added.

The Asian Development Bank (ADB) said last month that India's growth was likely to slow down to 7.1 per cent in 2016-17 due to demonetisation.

"Growth faltered in India to 7.1 per cent from 7.9 per cent in 2015 as fixed investment languished and demonetisation temporarily stymied commerce," the ADB said.

India will see growth re-accelerate despite drag caused by excessive corporate investment in the past and bank lending currently constrained by a heavy load of stressed assets, it added.

According to the earlier estimates released by the Indian Central Statistics Office (CSO), the country's GDP was expected to slow down to 7.1 per cent in 2016-17 as compared to 7.6 per cent in 2015-16.

Both the Reserve Bank of India and the International Monetary Fund have lowered India's growth estimates for the previous fiscal by up to 1 per cent, citing the impact of demonetisation.

--IANS

bc/vt