After
registering a robust growth in the first quarter of this financial year, the
pace of India’s economic growth is expected to have substantially slowed
in the July-September quarter amid higher fuel prices and a weaker rupee.
According to
a report by rating agency ICRA, the GDP growth of Indian economy is pegged at
7.2 per cent for the second quarter, dragged down by lacklustre agriculture and
industry. The GDP had grown by a higher than expected 8.2 per cent in the first
quarter of the fiscal as compared to the year-ago period.
The report
cited higher fuel prices and weakness in rupee as primary factors dragging the
industrial growth. Further, the country has been affected by heavy rains in
some states leading to massive flooding while the other states are dealing with
significantly deficient and drought like situations resulting in to muted
agricultural growth.
As per the
report, overall, manufacturing GVA (gross value added) growth is expected to ease
to 7 per cent in Q2 FY 2019 from the healthy 13.5 per cent expansion in
Q1FY2019. The agency said higher commodity prices may support a shallow
recovery in GVA growth in mining and quarrying from the marginal 0.1 per cent
in Q1 FY 2019 to around 2.5 per cent in Q2 FY 2019, despite a slowdown in
volume growth.
However,
services sector growth is expected to rebound to 7.8 per cent in the second
quarter from 7.3 per cent in Q1 FY 2019, buoyed by a sharp pickup in the
expansion in the Government of India’s non-interest revenue expenditure, a mild
rise in growth of bank deposits, air and ports cargo traffic, as well as a
moderation in the pace of FII outflows.
Going ahead,
the Indian economy is expected to slow down in the second half of the fiscal,
partly because of the base effect of higher growth last year. Tighter financial
markets, a credit squeeze and the lagged impact of weak currency and high oil
prices will continue to weigh on growth.
Latin Manharlal Group
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