India’s GDP growth in the September quarter (Q2) is expected to slow to 7.5-7.6 per cent over the previous three months mainly due to a slowdown in rural demand, a report released by SBI Research said on Monday (26 November).

India’s GDP growth rate stood at an impressive 8.2 per cent in the April-June quarter (Q1) of 2018-19. The Central Statistics Office (CSO) will be releasing estimates for Q2 GDP growth on Friday (30 November).

The SBI Ecowrap Report said that the Composite Leading Indicator (CLI) a basket of 21 leading indicators for Q2 FY 19 is showing a marginal declining trend. Consequently, the headline Q2 GVA growth could be 7.3 - 7.4 per cent, due to the slowing of rural demand.

The report said that “We also believe that the growth numbers in Q2 will be helped by a weak base in second quarter (Q2) of FY 18. We estimate that the base impact on Q2 GVA growth is around 30 basis points. Based on tax collections, we subsequently expect Q2 GDP growth at 7.5 - 7.6 per cent (Q1 at 8.2 per cent).”

The report also noted that commercial vehicle sales, domestic air passenger traffic and cement production had maintained double-digit growth during July to September 2018. All these indicators consequently pushed up GVA in the second quarter of FY 19.

The report pointed out that monthly data of various indicators for October 2019 suggest, the GVA growth is slowing down due to a decline in demand. “Of particular concern, is that non-food credit, bank deposits and sale of passenger and commercial vehicles have slowed down as compared to previous month. Also with a slowdown in Government Spending in H2FY19, the fiscal impulses to growth would now be clearly missing.”

Composite Leading Indicator

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