Mumbai: India’s economy grew 5.7% in the three months compared to June compared to the previous year, up from 6.1% in the previous quarter. Government data showed on Thursday. The persistent impact of demonetization is visible in the slow growth of construction. Estimates of GDP and GVA (value added to growth) have dramatically attracted our market and market expectations.
The combination of lower volumes and higher sales before the GST (Goods and Services Tax) and the positive IPM (wholesale price inflation) weighed on the manufacturing sector in the first quarter. disappointed despite the impact of demonetization.
The two key factors that contributed to the June quarter – trade, hotel and transportation, which benefited from higher sales before TSB, as well as increased government involvement reflected in the public administration subsector – should be moderated.
However, a certain counterweight is likely to accumulate in inventories after a strong recession in the June quarter. On a net basis, our estimate of 6.8 percent year-round GVA needs to be revised. At the end of the application, consumption recovery was more moderate than expected, suggesting that spending was not primarily related to GST implementation.
Investment in the private sector and manufacturing activity, weakened by low inventories and higher input costs, remain the weakest links in the history of growth. These trends will cause a downward revision in the Bank of India GVA (RBI) estimates, but we do not expect a knee shift towards a facilitation bias. A gradual rebound in general inflation will prevent them from falling imminently, but the trajectory of weakening demand is certainly increasing the disinflationary trend of fundamental trends. ”
The compensation is less than expected. Instead of the expected acceleration of public spending, the slowdown was marked. In addition, growth in industrial sectors due to the transition to GST (goods and services) appears to be much sharper than that suggested by high frequency indicators. But despite the general ubiquity of the optics around the bond’s growth that was printed in the handful of 5 percent for the second quarter, there is silver lining.
Despite the industrial slowdown, private demand has smartly returned to the back of services. Treasury-intensive sectors, including construction and real estate, which bear the brunt of the demonetization impact, seem to recover in a smart way. In terms of outlook, we continue to expect growth to be smart in the second half of the year, but at levels still lower than those reported by RBI.
The elimination of GST trails, the second consecutive good rain and the more synchronized recovery in global demand are expected to increase growth, although public spending may remain difficult. We do not expect the monetary policy committee to look for another type of accommodation, since the factors underlying the slower growth appear to be transitory.
The impact of demonetization has definitely disappeared. But next quarter’s impact will be the GST (Goods and Services Tax), which will have a negative impact on overall growth. The impact of the GST is only a quarter, or at best a month later. But in the medium and long term, it is expected to be positive. I expect GDP for the full year to be close to 6 percent. We do not expect any rate reduction here. RBI will remain hooked to inflation.
The GDP figures are certainly disappointing. The numbers seem to suggest that the slowdown in the last quarter has intensified due to the long-term slowdown and temporary shocks such as demonetization and destabilization of the GST. A reduction in RBI rates is becoming more likely, not immediately, but in the next 6 months. We need to review our GDP outlook figures for the full year closer or maybe less than 7 percent. “The negative impact of demonetization will no longer be there.” As we move forward, GST growth will depend on the clean-up rate of bank balance sheets to improve the credit culture in the economy.