Growth may slowdown in Q4 of FY17; new WPI, IIP numbers may improve numbers: Icra

MUMBAI: India’s economic growth may slow down to 7.1% in terms of the GDP or gross domestic product and 6.9% % in terms of GVA or gross value added during the fourth quarter of FY’17 ending March’17, according to ratings firm Icra. But the numbers could improve once the government incorporates the new WPI-wholesale price index and the IIP-Index of industrial production while calculating the growth numbers it said. Over a period of time the economy is also expected gain out of remonetisation.

The growth will be driven by a strong growth in the service sector which accounts for a bulk of the economic output. “Our forecast of a 6.9% GVA expansion in Q4 FY2017 builds in a healthy 8.8% YoY growth in services, and moderate rise of 5.4% and 4.0%, respectively, in industry and agriculture, forestry and fishing,” said Aditi Nayar, principal economist, Icra.

Icra expects the services sector to be boosted by the double-digit rise in a variety of sub-sectors such as air cargo traffic, bank deposits, corporate bonds, commercial paper as well as the government’s non-interest non-subsidy revenue expenditure. Industry on the other hand is is expected to record a moderate growth of 5.4% in Q4 FY2017, led by a 7.5% expansion in manufacturing GVA, reflecting the trend in earnings. Given the sequential dip in commodity prices and an unfavourable base effect, mining and quarrying is expected to record a GVA growth of ~5.0% in Q4 FY2017, lower than the mining output growth of 7.7% indicated by the IIP for that quarter.

However, revised WPI and IIP numbers may favourably impact GDP numbers. “The new WPI and IIP data, could lead to revisions in GDP and GVA levels and growth rates from FY2013 onward, at constant prices. In particular, the FY’17 growth rates may differ materially from the second advance estimates released by the CSO in February 2017. Further, some additional data on the impact of the note ban on the informal sectors may result in a sharper dip in growth in H2 FY2017, relative to the revised levels for H1 FY2017” Nayar added.