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Indian economy likely to grow by 7.7% in Q1FY19: SBI Research

Ahead of the Central Statistics Office's (CSO) quarterly Gross Domestic Product (GDP0 estimate release for April-June 2018, the State Bank of India (SBI) Research in its latest report has estimated that Indian economy is likely to grow by 7.7% in the Q1FY19 on the back of pick up in leading indicators like cement production, sale of vehicles and bank credit. SBI has based its assessment on its Composite Leading Indicator (CLI), which takes into account 18 major macro-economic indicators.

The research report 'Ecowrap' stated that the CLI is signalling that the economic activity for Q1 FY19 has picked up substantially and the Gross Value Added (GVA) growth would be 7.6%. However, it also said the headline GVA is being possibly pulled down by a weak agriculture growth. As per the report, major indicators that driving GVA in Q1 FY19 are cement production, passenger traffic, sale of both commercial vehicle and passenger vehicles, non-food credit growth and aircraft movement among others.

The SBI further said the quarterly trend of subsidy expenditure suggests that the government has been frontloading larger chunk of overall subsidy amount in the first quarter compared to other quarters and this is happening since 2016-17. In April-June 2018-19, subsidy expenditure to the tune of Rs 1,16,820 crore has been frontloaded. It said 'We believe, by front loading subsidy amount in Q1 may have some impact on Q1 GDP figure and the gap between GDP and GVA might come down to some extent in Q1 as compared to remaining quarters in FY19'. It added in fact, a trend analysis suggests that first quarter of fiscal may even witness GDP declining below GVA or staying marginally above GVA.

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