India likely remained the fastest growing major economy in the world last quarter.
Lower interest rates have helped support economic growth, say economists
Economists predict Indian economy grew 7.1% annually in March quarter
Factory and services activity expanded for most of the first quarter of 2
India likely remained the fastest growing major economy in the world last quarter, with growth buoyed by an improved performance in the agriculture and services sectors, according to a Reuters poll of economists. The Central Statistical Office (CSO) will later today announce the GDP or gross domestic product numbers for the quarter ended March 31. Economists polled by Reuters predict Indian economy grew 7.1 per cent annually in the first three months of this year, as compared to 7 per cent in the December quarter. Indian economy had grown at 7.9 per cent in the January-March quarter last year.
Here is what to expect:
1) Prime Minister Narendra Modi’s ban of high-value currency notes last year had a short-term impact on demand but private and public consumption has since recovered, say economists.
2) “The demonetisation drive barely impacted the economic momentum in the second half of FY’17. Most of the high-frequency indicators showed only a marginal slowdown and were quick to recover,” said Tushar Arora, senior economist at HDFC Bank.
3) Factory and services activity expanded for most of the first quarter of 2017, rising to a five-month high in March, indicating the effects from demonetisation were short-lived.
4) This acceleration in economic growth was partly driven by favourable domestic factors, including a significant fall in interest rates.
5) In addition, infrastructure spending is expected to support growth, as will higher agricultural output if the monsoon remains favourable.
6) The March quarter GDP numbers are also likely to get a boost from revision in the Index of Industrial Production (IIP) and the Wholesale Price Index (WPI) series to the 2011-12 base. “We expect the revision in the IIP and WPI series to provide a boost of about 20bps-30bps to 4QFY17 GDP,” says domestic brokerage Nirmal Bang.
7) The Central Statistical Office (CSO) earlier this month revised wholesale price index and industrial production series earlier month, changing the base year to 2011-12 (from 2004-05).
8) It remains to be seen whether the entire GDP series of the previous years will be restated for the new WPI and IIP series.
9) Going forward, the economy is also expected to benefit from the introduction of a nationwide goods and services tax (GST), making it far easier to do business in India. The GST is expected to come into effect from July 1.
10) “The GST will boost Indian GDP at least by 100-150 basis points. It won’t happen right after July 1, but probably by the end of FY18,” said Karan Mehrishi, lead economist at SMERA Ratings Limited.
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Story first published on: May 31, 2017 07:39 (IST)