India GDP growth over 7%; Will Q4FY18 number bring a pleasant surprise?

When India clocked over 7% growth in third quarter of FY18, the Narendra Modi formed government was praised for taking the country back into the race of fastest growing economy in the world. It came as most positive sign for the NDA government, which was accused of hamper growth due to its demonetisation decision and getting long-awaited Goods and Service Tax (GST) passed in a hurried manner. It is true due to these two indicators India’s GDP growth even reached to three year low in Q1FY18, but since then it has bounced back. Now that the Central Statistics Office (CSO) will be presenting fourth quarter of FY18 (Q4FY18) performance of India’s GDP numbers, can we expect 7.5% growth this quarter? 

India's Gross Domestic Product (GDP) came in at 7.2% in third quarter October - December 2017 (Q3FY18) - higher compared to 6.3% in Q2FY18. India's GDP has reached a 1-year high, as the last time, the economy stood near 7% mark, was in the corresponding period of the previous year. 

It needs to be noted that, many analysts, even including CSO predicts below 7% growth for India for entire  FY18. 

CSO earlier stated that, real GDP or Gross Domestic Product (GDP) at constant (2011-12) prices in the year 2017-18 is likely to attain a level of  Rs 130.04 lakh crore, as against the first revised estimate of GDP for the year 2016-17 of Rs 121.96 lakh crore, released on 31st January 2018.

Thus, the growth in GDP during 2017-18 is estimated at 6.6% as compared to the growth rate of 7.1% in 2016-17.

Even Ficci recently predicted India's GDP growth is expected at 7.1% for the January-March quarter of the last fiscal and 6.6% for the entire 2017-18. 

IMF in its World Economic Outlook update in January 2018 said that India will grow by 6.7% in FY18, 7.4% in FY19 and 7.8% in FY20.

Talking about Q4FY18, Sumedha Dasgupta economist at ICICI Bank said, “Overall, we expect GDP growth to have clocked a healthy ~6.6% YoY in FY2018. Growth is expected to show a sharp fillip to ~7.5% YoY in FY2019 supported by fading of GST-related disruptions, renewed buildup of supply chains, improved rural consumption demand on the back of rising rural wages, shored up fiscal support and better export performance.” 

WATCH ZEE BUSINESS VIDEO HERE

Dasgupta added, “Key risks to our outlook include oil prices retaining their bullish trend impacting foreign inflows and inflation, or if the spatial/temporal distribution of monsoons is unfavourable. In the absence of these headwinds, growth is expected to step up.”

GVA growth is expected to pick up to ~7.0% YoY by ICICI Bank,  from ~6.1% YoY in 9M FY2018, led by a broad-based improvement in industry and services

Therefore, Dasgupta added, GDP growth is expected to clock 7.1-7.2% YoY in Q4 FY2018 (~6.4% YoY in 9M FY2018).

Dr. Soumya Kanti Ghosh, Group Chief Economic Adviser at State Bank of India said, “GDP growth for Q4 and FY18 is likely to spring a positive surprise. We expect GDP growth for Q4FY18 would be around 7.6% and subsequently the FY18 growth would be at 6.7%.” 

SBI expects 9.0% growth in Manufacturing GVA in Q4 due to smart growth in Corporate GVA as both of these are strongly positively correlated. Corporate GVA which decelerated since Q3 FY17 rebounded in Q2 FY18 and exhibited positive growth of 16.1% in Q4 Agriculture sector will post a growth rate in excess of CSO projections with a better foodgrain production estimates. We also believe Service sector growth will hold up in excess of 8%. 

Considering the above factor, Indian economy will once again outrun Chinese economy and will be seen between 7.1% to 7.5%.