India’s GDP growth accelerates to 8.2%, a two-year high

September 1, 2018

NEW DELHI - India’s GDP growth in Q1 FY2019 (India’s fiscal year ending March 2019) rose to its highest in more than two years - 8.2% y/y . This follows an impressive reading of 7.7% y/y in Q4 of the previous fiscal year.

Gross value added-based growth (GVA) also rose in tandem to 8.0% y/y.

Growth received a fillip from private consumption and net exports were a smaller drag than in recent quarters.

In looking ahead, ANZ Bank says its FY2019 GDP forecast of 7.1% now faces upside risks, even if the Q1 figure is revised down somewhat.

“We expect inflation prints to be soft over the next few months before resuming their upward trajectory in Q4 FY19,” ANZ says in a research note.

“Therefore, the exigency to follow through with further hikes remains low, despite the strong growth outcome.

“Accordingly, we continue to expect the Reserve Bank of India (RBI) to stay on hold through 2018 with a 25bps hike likely in February 2019.”

ANZ says India’s private consumption growth at 8.6% y/y was the highest recorded since the demonetisation quarter (October-December 2016).

Government consumption growth remained relatively high, and this was also reflected in public services’ GVA growth of 9.9% y/y.

“After stellar 14.4% y/y growth recorded in the previous quarter, investment clocked a still respectable 10.0% y/y in Q1 FY2019,” ANZ says. The bank believes investment is being largely driven by public infrastructure spending.

“Private investment remains inhibited by tighter financial conditions, despite a recent pick-up in capacity utilisation rates,” it says.

Meanwhile, 12.7% y/y growth in exports ensured that net exports constituted a smaller drag on growth than in recent quarters.

Growth in manufacturing GVA was at a two-year high of 13.5% y/y and contributed 2.3% to GVA growth. “However, this is somewhat at variance from the message from industrial production data, which has been comparatively softer.”

Agriculture GVA growth strengthened to 5.3% y/y from 4.5% y/y in the previous quarter.  www.live.anz.com (ATI).