India's Q4 growth likely to jump to 7.8%

NEW DELHI: India's GDP growth for the fourth quarter of 2015-16 is likely to improve to 7.8 per cent - the highest pace in six quarters - on account of uptrend in economic activity and favorable base effect, says a report.

According to the global financial services major Citigroup, the January-March quarter GDP is likely to reinforce growth optimism.

"Given the sequential uptrend in several economic activity indicators and supported by a favorable base effect, we expect real GVA (Gross Value Added) growth to improve to 7.8 per cent y-o-y in Q4 vs 7.1 per cent in Q3," Citigroup said in a research note, adding that this would be the highest pace of growth in six quarters.

The report noted however that any upward revision to fourth quarter GDP of the previous financial year could introduce "downside risk" to the projections.

As per the report, on the back of the third advanced estimate of agriculture production, agriculture output could surprise positively despite second year of inadequate rainfall. According to estimates, Rabi foodgrain production rose by 3.5 per cent to 128 MT from 124 MT last year.

"Factoring in stable growth in allied activities, we expect agriculture GVA (which comprises 17 per cent of Q4 GVA) to rise to 3-3.5 per cent Y-o-Y in Q4 vs a contraction of (-)1 per cent last quarter," the report said.

Moreover, while services growth could largely stay unchanged, other trade and transportation service indicators such as cargo traffic and passenger air traffic have also shown uptick, it added.