ICRA Says GDP Growth May Ease To 7.2% In July-September Quarter

India's economic growth is expected to slow down to 7.2 percent in the July-September period due to sluggishness in agriculture and industry, after an upswing in preceding three months.

The dip in the growth number will be largely on account of a pull down from the industrial sector where growth is expected to slow down to 7.1 percent in the September quarter compared with 10.3 percent in the previous quarter, rating agency ICRA said in its recent report. The farm sector may slow down to 3.5 percent from 5.3 percent earlier.

The gross domestic product had grown by a higher than expected 8.2 percent in the first quarter of the fiscal. Official data on quarterly growth will be released at the end of this month.

Higher fuel prices and the weak rupee were pointed out as the primary factors dragging the industrial growth, while an uneven and sub-par monsoon, flooding in some areas amid a late withdrawal of the monsoon rains, and instances of crop damage and pest attacks will impact the farm sector.

ICRA's Principal Economist Aditi Nayar said pre-tax margins for companies have declined on a quarter-on-quarter basis because of a rise in input and energy costs and a weaker rupee. “Overall, we expect manufacturing GVA (gross value added) growth to ease to 7 percent in Q2FY19 from the healthy 13.5 percent expansion in Q1FY19.”

The agency said higher commodity prices may support a shallow recovery in GVA growth in mining and quarrying from the marginal 0.1 percent in Q1FY19 despite a slowdown in volume growth. Similarly, electricity, gas, water supply and other utility services and construction activity will also show an upswing due to a variety of sectoral factors, it said.

On agriculture, the agency said the first advance estimates of crop production indicated a decline in kharif output in 2018-19 for pulses, coarse cereals, and cotton, and a rise in oilseeds, sugarcane and rice.

The services sector growth is expected to rebound to 7.8 percent for the September quarter from the 7.3 percent in the first quarter, led by a sharp pickup in the expansion in the Centre's non-interest revenue expenditure and a mild rise in growth of bank deposits.