India to see an uptick in growth

Mumbai: After witnessing a sharp slowdown in growth during the first quarter of this fiscal, India’s GDP growth is likely to trend higher in the second quarter on the back of a recovery in automobile, mining and electricity sector, SBI said in a research report.

India’s GDP, which decelerated to 6.1 per cent in Q4FY17, further fell to a thirteen-quarter low of 5.7 per cent in Q1FY18.

The slowdown was due to slowing consumption demand, contraction in manufacturing activity due to implementation of GST, and a decline in mining activity.

However, the report highlighted that the activities in trade, hotels, transport and communication, which were affected after demonetisation, bounced back to register a five-quarter high growth of 11.1 per cent in Q1FY18.

Most of the lead indicators of activities in this segment like foreign tourist arrivals, international passenger and airfreight traffic, railway traffic, and telephone subscribers have showed an uptick in recent months.

“We base our optimism on several factors. First, SBI Composite Index, which tracks the manufacturing activity in the country, has been quite buoyant for September & October. The continued possible traction in September growth rate is because of evidence of restocking in automobiles. The discounts offered by vehicle dealers possibly enabled them to clear stock and facilitate restocking post GST. We will not be surprised if IIP growth in September is well in excess of 5 per cent, as mining & electricity growth is also likely to be significantly better as state electricity boards have purchased power because of festive demand,” it said.

According to it, the consumption related sectors are witnessing an increase in investment opportunities, which bodes well for the investment cycle going forward.

The only point of concern is the growth rate in the rural sector. The growth in the agriculture sector is likely to remain muted as key food grain producing states witnessed deficient rainfall.