India's GDP growth may slip further to 4.7% in Q2FY20

As the second quarter GDP growth numbers are slated to be announced tomorrow, the consensus among analysts and economists is that the numbers would be worse than the first quarter GDP growth numbers of 5%.

Two rating agencies - India Ratings and ICRA - expect the second quarter GDP growth numbers to be 4.7%. Even Kotak Economic Research estimates the second quarter GDP growth to be at 4.7% against their earlier estimate of 5.2%. Though Moody's do not comment on quarterly numbers, their projections for the calendar year 2019 and 2020 are in line with the general sense of despondency in the economy.

According to India Ratings, the second quarter GDP growth is likely to be 4.7% despite the favourable base effect. It says that declining growth momentum suggests that even the second half of the current financial year will now be weaker than previously forecasted and is likely to come in at 6.2%.

ICRA, on the other hand, expects a further deterioration in the growth of the Indian GDP and the gross value added (GVA) at basic prices in year-on-year (YoY) terms to 4.7% and 4.5%, respectively in the second quarter, from 5.0% and 4.9%, respectively, in the first. This was attributed to a weakening momentum in the industry. However, the agency expects agriculture and services to maintain the growth rate recorded in the first quarter.

According to Aditi Nayar, principal economist, ICRA Ltd: "With subdued domestic demand, investment activity, and non-oil merchandise exports weighing upon volume expansion, manufacturing growth is expected to decelerate further from the marginal 0.6% in the first quarter. To some extent, lower raw material costs would bolster earnings, and may prevent manufacturing GVA from slipping into a year-on-year contraction in the second quarter."

Gross value added or GVA measures the value for the amount of goods and services produced in a country, less the cost of all inputs and raw materials used in production.

Kotak Economic Research, while predicts a 4.7% growth in the second quarter, it also revises the full-year growth estimate from 5.8% to 5%. According to a research report released on 11 November, it says even though the government has announced corporate tax rate cuts and a new fund to support stalled projects, they are unlikely to contribute substantially to growth in the near term in the absence of demand.

Moody's, on the other hand, predicts a 5.6% GDP growth in the calendar year 2019 compared to 7.4% in 2018. The global rating agency, however, expects economic activity to pick up in 2020 and 2021 to 6.6% and 6.7%,