Mumbai

 

Aided by recovery in private investments and a sustained push from government expenditure, especially of the consumption variety, India’s gross domestic product (GDP) grew at 7.7% in the final quarter of the last financial year (Q4FY18), the fastest pace in seven quarters, according to the data released by the Central Statistics Office (CSO) on May 31, 2018.

 

“The broad takeaway is that there has been a sharp upturn in economic activity in the quarter ended March 2018, which has improved the real GDP growth for fiscal 2018 to 6.7%, from 6.6% estimated earlier. This is in sync with the healthy corporate results for Q4, if we leave out banks and oil marketing companies. Clearly, the economy is recovering well post implementation of the Goods and Services Tax (GST) last year, given steps from the government to resolve glitches,” said Crisil in a press statement.

 

The economy continued its growth momentum as real GDP growth spurted to an eight-quarter high of 7.7% in Q4, up from 7% (revised downward from 7.2% earlier) in Q3. This suggests that demonetisation impact is fading and GST related glitches are getting resolved.  “The improvement in growth appears to be broad-based, with both consumption and investment showing improvement. On the supply side, growth in gross value added (GVA) - a firmer measure of economic activity - improved 100 basis points (bps) to 7.6% in Q4 from 6.6% in Q3. While agriculture (Q4 growth at 4.5% vs 3.1% in Q3) and industrial (8.8% vs 7.1%) sector displayed improvement in growth, services sector growth remained stagnant at 7.7%,” add Crisil.

 

On an annual basis, real GDP growth for fiscal 2018 has been revised up by 10 bps to 6.7%, compared with the previous estimate. Notably, while consumption remains the biggest driver of GDP growth, investments have started to turn supportive in the last two fiscals, with investment growth surpassing GDP growth in both fiscal 2017 and fiscal 2018.

 

Commenting on the outlook, Crisil said, “GDP growth has shown a sharp upturn in Q4 fiscal 2018. We expect the momentum to continue and lift growth to 7.5% in fiscal 2019 compared with 6.7% in fiscal 2018. That, however, would still be lower than the long-term trend of 7.6%. Plus there is a downside risk to this number if oil prices sustain at the current levels.”