India's GVA growth can inch up to 6.3% in Q2FY18

Economic expansion in terms of gross value added (GVA) is expected to improve to 6.3% in the three months to September from 5.6% 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% recorded in the second quarter of FY17.

"We expect GVA growth at basic prices to record a sequential recovery to 6.3% in the second quarter from 5.6% 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% in the period from 1.6% 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% 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% in the quarter.

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

Government's non-interest revenue spend slid sharply to 0.8% in Q2 from 26.8% 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% in Q2 from 10.7% in Q1.

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