The government will release the GDP or gross domestic product data for the January-March period on Wednesday at 5:30 pm.
According to a Reuters poll of 35 economists, India is set to hang on to its status of the world’s fastest growing economy with GDP for the reporting quarter expected to grow 7.1 per cent year-on-year. During the previous quarter (October-December) India’s GDP grew at 7 per cent. China’s GDP in the January-March period grew by 6.9 per cent, so as per estimates India is well on track to surpass that.
Forecasts for India’s fourth quarter GDP ranged from 6.5 to 7.8 per cent.
Global ratings agency Moody’s Investors Service on Wednesday said it expects
India’s GDP to gradually accelerate+
to around 8 per cent over the next three to four years. The Indian economy will grow by 7.5 per cent during financial year ending March 31, 2017 (FY17) and 7.7 per cent in the fiscal year 2018, it said.
Wednesday’s likely robust GDP data will come as a shot in the arm for the Narendra Modi government that completed three years at the Centre last week. PM Modi’s demonetisation drive that outlawed high-value currency notes last year in November in a bid to curb black money had a short-term impact on demand and private and public consumption recovered soon thereafter, say economists. “The initial impact of demonetisation was not as strong as was feared,” said Shilan Shah, an economist at Capital Economics in Singapore. “Consumer spending just got delayed, it didn’t get abandoned.”
The fourth quarter GDP data is also likely to get a boost from the revision in the IIP or Index of Industrial Production and WPI or Wholesale Price Index series to the 2011-12 base. Brokerage firm Nirmal Bang sees a boost of about 20-30 basis points during the reporting quarter. The Central Statistical Office (CSO) earlier this month revised IIP and WPI series, changing the base year to 2011-12 from 2004-05.
India’s biggest tax reform since independence in 1947, the GST or Goods and Services Tax is also expected to contribute 2 per cent to the country’s GDP. GST that aims to subsume all central and state taxes will be rolled out across the country on July 1, bringing India under a single tax regime. The contribution to GDP will happen eventually and the impact will be weighable by FY18, say economists.
Most economists, however, don’t take India’s GDP figures at face value after a change in methodology two years back that transformed a sluggish economy into a world-beater overnight.
What is encouraging though is this year monsoon rains have hit the Kerala coast early raising prospects of a good harvest that will boost farm incomes. And with government pay hikes also in the works, the outlook for a sustained recovery looks good. However, analysts still worry over India’s uneven growth and ground realities. While private sector investment continues to be subdued, the country’s state banking sector is laden with bad debts.
(With inputs from Reuters)