New Delhi: Another good quarter may be in the store for the economy following 7.7% growth in the January-March period, making for a strong start to the new financial year. 

Driven by manufacturing and agriculture, India’s economy is likely to have grown 7.5-7.7% in the first quarter of FY19, independent experts said, ahead of the release of the official estimate next week. Some economists even expect growth to have crossed the 8% mark.

A favourable base effect will also give growth a boost. Gross domestic product (GDP) growth had dipped to a low of 5.6% in the first quarter of FY18 owing to disruptions due to the introduction of goods and services tax (GST) and the lingering impact of demonetisation. That lowered economic growth in FY18 to 6.7% from 7.1% in the year earlier. The Reserve Bank of India expects FY19 growth at 7.4%, on par with private estimates. 

“We expect an unusually high GDP growth print for Q1, upwards of 8%,” said Saugata Bhattacharya, chief economist at Axis Bank. “Part of this is due to the base effect of a sharp slowdown in Q1 of FY18, mostly due to the de-stocking in the pre-GST quarter last year.”

Axis Bank has forecast GDP at 8-8.3% and gross value added (GVA) at 8.1-8.4%. The Central Statistics Office will release GDP numbers for the June quarter on August 31.

Higher growth numbers ahead of national elections next year would help bolster the government amid a debate over its economic record versus that of its predecessor following the release of back-series data recently.

Stronger growth would also be factored in by the monetary policy committee at its next review scheduled for October 3-5.

Shubhada Rao, chief economist at Yes Bank, expects first quarter GDP growth at 8% and GVA at 7.9% due to the base advantage and momentum from the manufacturing sector.

India’s industrial output expanded 5.2% in the first three months of the fiscal year with manufacturing growing 5.2% compared with 1.6% in the year-ago period, as per the Index of Industrial Production (IIP), a quantity-based measure. GDP is assessed on value added, which means that manufacturing GDP growth can be higher than that measured by IIP. Commercial vehicles sales rose a robust 51% in the quarter, strengthening the prospects of a June quarter boost.

Bhattacharya added that there were signs of a revival in domestic demand, which has boosted output of both manufacturing and services. “Also, credit offtake has picked up and there has been an uptick in construction activity as well as government expenditure,” said Madan Sabnavis, chief economist at CARE. Bank credit grew 12.8% in the April-June period.

SLOW-GROWTH AREAS
On the services side, Devendra Pant, chief economist at India Ratings, highlighted finance and public administration as slowgrowth areas, even as some activity is being witnessed in the construction sector. The rating agency expects both GVA and GDP growth at 7.5%. “The pickup in the YoY GVA growth in Q1 FY2019, relative to Q1 FY2018, is expected to be led by the industry (to +9.4% from +0.1%) and agriculture (to +4.5% from +3.0%), offsetting some weakening in the momentum for the services sector (to +7.0% from +9.5%),” said Aditi Nayar, principal economist, ICRA NSE -0.87 %.

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