Government pegs FY19 GDP growth at 7.2%: Which sectors will boost Indian economy?

The Central Statistics Office (CSO) predicts Indian economy to grow at a rate of 7.2% by end of fiscal 2019, which is higher compared to 6.7% in the previous fiscal. What is noteworthy is that Indian government’s estimate for GDP is lower compared to RBI’s projection of 7.4%. Anticipated growth of real GVA at basic prices in FY19 is 7.0% against 6.5% in FY18. As per SBI Ecowrap research report, the country’s economy is in better position now and sectors like industry and agriculture are seeing revival. One of the key drivers likely to boost Indian economy would be real estate in FY19. Agriculture and Allied Activities is likely to grow at 3.8% in FY19 as against previous year growth of 3.4%. 

Dr. Soumya Kanti Ghosh, Group Chief Economic Adviser at SBI said, “We believe that the estimate is primarily due to growth in allied activities (Livestock, forestry and fishing). The most striking fact is that agriculture deflator for FY19 at –0.1% is lowest in 10 years indicating continued distress (or low demand) in rural areas.”

The industry sector too is expected to shine for Indian economy, and is estimated to grow at 7.8% in FY19 as compared to 5.5% in FY18. Ghosh believes that the sector will rise due to better performance of all the sub-sectors, except ‘Mining & Quarrying’. Manufacturing, and ‘Electricity, Gas, Water Supply & Other Utility Services’ is estimated to grow at 8.3%, and 9.4%. respectively. 

“Mining and Quarrying’ has dragged the overall growth to some extent which is estimated to grow by 0.8% much lower than the previous growth of 2.9% in FY18," Ghosh said.

Interestingly, Ghosh believes that, the construction’ sector remains the key driver of industrial activity and s expected to grow by 8.9% in FY19 against 5.7% in FY18, mainly driven by better performance from Cement and steel sector. 

In case of service sector, it is likely to record growth of 7.3% in FY19, compared to 7.9% in FY18. "The sub segment ‘Financial, Real Estate & Professional Services’ growth improved marginally to 6.8% in FY19, compared to 6.6% growth in FY18. In this sector, around 73% is contributed by the growth in Real estate and Professional services. The Public Administration sub segment is supposed to decline to 8.9%, compared to last year growth of 10.0%," she said.

Ghosh expects the CSO estimate to change, as it has a shelf life of only two months. This is because CSO will release first revised estimate of FY16, FY17 and FY18 on 31 Jan’19 and based on that today’s estimate of GDP and GVA for FY19 would be revised further as 2nd advance estimate for FY19 on 28 Feb’19. 

Talking about CSO estimate, Anindya Banerjee, analysts at Kotak Institutional Equities said, "CSO’s advance estimates for the full year GDP growth for FY19 clearly acknowledged an economy which is slowing down on account of slowdown in private consumption. Private consumption accounts for nearly 60% of the overall economic growth. As per CSO estimates, real GDP growth should strengthen to 7.2% in FY19 from 6.7% in FY18 . FY19 real GVA growth is expected at 7% against 6.5% in FY18. With 1HFY19 GDP growth at 7.7%, the implied 2HFY19 GDP growth is likely around 6.8%. Similarly, with 1HFY19 GVA growth at 7.4%, the CSO’s implied 2HFY19 GVA growth should be around 6.5%. The CSO’s advance estimates peg FY2019 nominal GDP growth at 12.3% as against 10% in FY2018."

During Q2FY19, India’s gross domestic product (GDP) growth data slows down to 7.1%  from 8.2 per cent in Q1. However, the Q2FY19 numbers were still better compared to a year ago same period.India`s $2.6 trillion economy which Asia`s third largest, grew 6.3% in the July-September quarter of 2017, the data released by the statistics ministry showed.