India to post 7.5% growth in 2018 as recovery from ‘GST, demonetisation’ underway, says Nomura

Published On: 01, Dec 2017 | Source:

Reposing faith in the growth story of the Indian economy, after India’s GDP sharply rebound to 6.3 percent in fiscal second quarter July-September from a three-year low of 5.7 percent in the first quarter, global brokerage Nomura has predicted that India will record 7.5 percent growth rate in 2018. “GDP growth accelerated to 6.3 percent year-on-year in Q2 from 5.7 percent Q1, suggesting the economy bottomed out in Q1 and a recovery is underway as the drag from the twin disruptions gradually fades. The recovery was led by the industrial sector. October’s high-frequency data are weak, but we expect the easing GST compliance burden, ongoing remonetisation, bank recapitalisation, and a supportive global environment to support a growth recovery ahead. Expect GDP growth to pick up to 6.9 percent year-on-year in Q3 and average 7.5 percent in 2018. Expect a hawkish hold from RBI next week”, said Sonal Varma, MD and Chief Economist, Nomura while talking to CNBC-TV 18.

India’s GDP growth sharply rebound to 6.3 percent in fiscal second quarter July-September from a three-year low in the first quarter, as businesses sprung into economic activity ahead of a condensed festive season and accelerated production to build inventory after the implementation of GST. India’s GDP growth in the second quarter (Jul-Sep) accelerated to 6.3 percent from 5.7 percent in Apr-Jun and 6.1 percent in Jan-Mar, Central Statistics Office data showed on Thursday. However, the pace of growth in Jul-Sep was still way below 7.3 percent recorded in the corresponding quarter a year ago.

A sharp bounce in manufacturing growth rate at 7 percent in July-September from 1.2 percent in the preceding quarter was among the primary drivers behind the second quarter GDP growth acceleration. On the other hand, farm growth slowed in the second quarter to 1.7 percent from 2.3 percent in the preceding three-month period. Agricultural production in the second quarter was held up due to poor crop output, India’s Chief Statistician TCA Anant said.

Construction activity also recorded a decent expansion with a growth rate of 2.6 percent in July-September vs 2 percent in the previous quarter. The industrial activity also saw a spike with 5.8 percent growth rate in the second quarter vs 1.6 percent in the first quarter. Electricity output growth at 7.6 percent vs 7 percent also supported economic growth.

Quarterly GVA for Q2 of 2017-18 for Trade, Hotels and Transport & Communication and Services related to broadcasting grew by 9.9% on-year. Mining and quarrying growth also picked up significantly, accelerating to 5.5% in second quarter from 0.7% in the previous quarter.