GDP growth for September quarter set to bounce back as businesses overcome hiccups

GDP growth for September quarter set to bounce back as businesses overcome hiccups
Highlights

According to a Reuters poll of economists, India\'s GDP growth rate is likely to pick up in the September quarter, halting a slide as businesses started to overcome teething troubles after the bumpy launch of GST.

NEW DELHI: According to a Reuters poll of economists, India's GDP growth rate is likely to pick up in the September quarter, halting a slide as businesses started to overcome teething troubles after the bumpy launch of GST.

The economy also has moved past the disruptions encountered after India's shock ban on high-value banknotes in November 2016, economists say.For July-September, the poll pegs the expected GDP growth rate at a median of 6.4 per cent. Forecasts ranged from 5.9 per cent to 6.8 per cent.

A 6.4 per cent growth would mark a sound acceleration from 5.7 per cent in April-June, but still lag China's 6.8 per cent and Philippines' 6.9 per cent for the three months through September.

Big companies have largely adjusted to the changes while benefiting from reduced logistics costs. Prominent Indian firms had their best profit growth in last six quarters in July-September, according to Thomson Reuters data.

The results are an indication that firms are starting to recover after being hit earlier this year by uncertainty tied to the rollout of GST and demonetisation.
In July-September, auto sales, manufacturing, electricity generation grew more quickly than in the previous quarter.

"We expect a gradual recovery led by the industrial sector as businesses adjust to the GST regime," said Aditi Nayar, an economist at ICRA, the Indian arm of Moody's Investors Service.

RATINGS UPGRADE

On November 17, Moody's upgraded India's sovereign credit rating for the first time in nearly 14 years, saying continued progress on economic and institutional reforms would boost its growth potential.

It expects the economy to grow 6.7 per cent in the fiscal year ending March 31, and 7.5 per cent the following year.

Many private-sector economists expect faster growth in the current quarter and January-March as consumers and businesses step up spending and global recovery gains traction.Urjit Patel, governor of the Reserve Bank of India (RBI), said last month that signs of an upturn were visible and growth was likely to top 7 per cent in those quarters.

Modi's administration hopes the ratings upgrade can attract more foreign investors, who pumped $15 billion into Indian equities in July-September, up 44 per cent from the previous quarter.

Still, the world's seventh largest economy, which grew at more than 9 per cent a year from 2005 through 2008 is far from firing on all cylinders. Domestic demand and private investments remain weak.

Finance Ministry officials hope the central bank will cut interest rates soon, but analysts say that rising global oil prices, which could pinch consumers through higher inflation, may instead force the RBI to hike in the second half of 2018, denting growth momentum.

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