Icra sees growth inching up to 6.3% in Q2

Economic expansion in terms of gross value added (GVA) is expected to improve to 6.3 per cent in the three months to September from 5.6 per cent in the previous quarter, on the back of a rise in industrial growth, says a report.

Headline GVA growth, however, is likely to trail the 6.8 per cent recorded in the second quarter of FY17.

"We expect GVA growth at basic prices to record a sequential recovery to 6.3 per cent in the second quarter from 5.6 per cent in the first quarter, led by a broad-based pick up in industrial growth, even as agriculture, forestry and fishing and services are likely to moderate," rating agency Icra said in a report today.
 

Industrial growth improved to over 5.8 per cent in the period from 1.6 per cent in the first quarter.

Icra's principal economist Aditi Nayar said the second quarter was a period of adjustment for the s economy, following the goods and services tax (GST) rollout.

"Improved corporate earnings, partly reflecting milder discounts and higher commodity prices, and a pick-up in mining and electricity, are expected to contribute to a sequential recovery in Q2, offsetting the moderation in government spends and a tepid kharif harvest for several crops," Nayar said.

The significant turnaround in mining, a favourable base-effect, and supportive commodity prices, should boost mining and quarrying sub-sectors to a healthy 7.5 per cent in the quarter, she added.

Electricity generation also recorded an improvement led by the thermal segment.

However, the real estate sector remains subdued on account of weak consumer sentiment, led by factors such as the note-ban-led drag, full implementation of the Rera and GST. This will cap construction sector remaining low at near 2.5 per cent in the quarter.

The agency expects services growth to ease to 7.3 per cent from 8.7 per cent in the first quarter.

Government's non-interest revenue spend slid sharply to 0.8 per cent in Q2 from 26.8 per cent in Q1, reflecting the waning effect of front-loading of spending. However, available data for 12 states indicates a pickup in their revenue spend grew to 14.1 per cent in Q2 from 10.7 per cent in Q1.

The report expects GVA growth in public administration and defence to ease to around 6.3 per cent from 9.5 per cent in Q1, weighing upon the overall GVA expansion.