The government of India is expected to publish the GDP growth rate estimates for Q2, FY 19-20 by the end of November, 2019. India economy has been witnessing a slowdown. The GDP growth rate for Q1, FY-19-20 stood at 5% as compared to 8% in the same quarter in the previous financial year. The growth rate for Q2 in FY 18-19 stood at 7%. It is of immense interest to see what will be the GDP growth rate estimate for Q2, FY 19-20.
The Indian economy has been witnessing a huge decline in demand. GST collection growth rate has been showing a steady decline. The car sales has been witnessing a record low , though there has been some positive change in the last month. FMCG sector also faces huge dearth in demand specially in the rural sector. The government of India and RBI has announced host of measures to control for this slowdown. Some of the major announcements has been the corporate tax cut and also host of measures pertaining to various sectors. Now how all of these policies will impact remains to be seen.
The recently published data on various economic indicators are not encouraging. The Index of Industrial Production has been witnessing a negative growth in the recent months. Same is the story for the growth rate of the eight core sectors. The average IIP for Q1, FY, 19-20 was at 3%. This has further declined to -0.4% as of Q2, FY, 19-20. The average growth rate for eight core sectors also saw a decline from 1.62% in Q1, FY, 19-20 to 0.14% in Q2, FY 19-20.
Similar situation prevails if one looks at the sectoral credit growth data published by the Reserve Bank of India. All the sectors have witnessed a drop in credit growth in Q2, FY-19-20 as compared to the previous quarter. The personal credit growth has remained same. Moreover, if we compare the growth rate of credit for the service sector, which contributes the maximum in GDP growth, with that of the previous financial year the story becomes gloomy. The credit growth for service sector in Q2, FY 18-19 stood at 24.57% as compared to 11.93% in Q2, FY 19-20.
IPD finds that among all the indicators, Core sector growth , growth rate in Personal Credit and IIP has very high correlation with the GDP growth rate. This is followed by the credit growth rate of service sector. Based on all the above indicators IPD forecasts that the GDP growth rate estimates in Q2, FY 19-20 will be between 4.1%-4.4%.
All major institutions has been conservative in forecasting the growth rate for Indian Economy. State Bank of India has pegged the forecast for Q2, FY-19-20 at 4.2%. Same is the forecast for Nomura. ICRA on the other hand predicts the growth rate in Q2 to be at 4.7%. In terms of YoY growth, Moody’s has reduced the forecast to 5.6%. SBI has predicted a 5% growth rate in FY 19-20. NCAER on the other hand has predicted the YoY growth rate to be at 4.9%. The YoY growth rate for FY, 18-19 stood at 6.8%.