India’s third quarter (Q3) GDP likely to be 6.7%: State Bank of India report

India’s gross domestic product (GDP) is likely to grow at 6.6-6.7 per cent in the third quarter and 7.2 per cent for the full financial year, the State Bank of India (SBI) said in its research report. The weak infrastructure activity, based on the previous Index of Industrial Production (IIP), is one of the key reasons for the bank to predict the 6.7 per cent GDP growth rate.

“We believe that the GDP deflator which is presently at 4.1 per cent, could be revised downwards by at least 50 basis points, thus pushing the GDP close to 7.2 per cent in FY19,” the bank said in its report.

The yearly SBI composite index for February saw a marginally rise to 50.60 (a score of under 50 indicates negative growth). The index remained volatile and declined to 11-month low of 46.10 (low decline) in February from 52.8 (moderate growth) in January. “Based on the annual performance of these leading indicators, we are expecting GDP to grow around 6.6-6.7 per cent in the December quarter, SBI Research said.

The report said the CSO (Central Statistics Office) has recently revised GDP growth for FY18 from 6.7 per cent earlier to 7.2 per cent. At this rate, FY19 growth rate would have been at 5.9 per cent (earlier 7.2 per cent), it said.

With the decline in index, IIP manufacturing may grow at 1.5 per cent and overall IIP at 2.5 per cent in February, the report said. In January this year, the Consumer Price Index (CPI) eased to a 19-month low at 2.05 per cent, while the industrial production in December 2018 bounced back to 2.4 per cent after sliding to a 17-month low in November.

On Goods and Services Tax (GST), the bank said the collections are likely to be lower than the previous month. The amount, the report said, will be around Rs 95,500 crore as against the previous month’s collection of Rs 1.05 lakh crore.

The recent GST rate cuts can put the fiscal performance of the economy under pressure. The erratic collections of the national tax indicate that the tax regime is yet to stabilise and get accustomed to the economy.

Shekhar Ghosh is consulting editor, Indoasiancommodities.com. He has edited and written for publications like Business India, Business Standard, Business Today, Outlook and many other international publications. He can be reached at shekhar.ghosh@indoasiancommodities.in.

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