India's Q1FY18 GDP: What will be the numbers this time?

Key Highlights: 

• Real GDP at constant (2011-12) prices for FY17 was at 7.1%
• India's GDP in Q4FY17 stood at 6.1%
• Gross Value Added (GVA) were at 5.7% in Q4FY17

The Central Statistics Offer (CSO) will be presenting India's Gross Domestic Product (GDP) numbers for the first quarter of financial year 2017-18 (FY18).

In Q4FY17, India's GDP numbers missed estimates and dropped to 6.1%. While Real GDP at constant (2011-12) prices for FY17 is estimated at Rs 121.90 lakh crore showing a growth rate of 7.1% over the year 2015-16 of Rs 113.81 lakh crore, as per CSO.

source: tradingeconomics.com

HDFC Bank said, “The sharp slowdown in Q4 should be partly seen in light of a higher deflator impact, which is visible in the difference between growth in nominal and real terms –nominal GVA expanded by 11.3% in Q4, but in real terms the growth fell down to 5.6% in Q4 reflecting a higher GVA deflator (5.7%).”

Now the Goods and Services Tax (GST) is in picture, so what will be the Q1FY18 GDP number of India. Here's what analysts think.

A Reuters poll pf economists, suggested that the GDP numbers is expected to have expanded 6.6%  in the April-June quarter from a year earlier. 

Though this would be an acceleration compared to previous quarter, yet the it will lag China`s 6.9% print in the latest quarter. 

Forecasts ranged from 5.7 to 7.2 percent, as per the poll. 

According to BMI Research, India's growth is expected to pick up following the negative ramifications from the demonetisation drive in November 2016, but weak public banks will likely cap the recovery.

The research believes in the coming quarters India's economy will recover and clock real GDP growth of 6.9% this fiscal. 
Madan Sabnavis and Rucha Ranadive, economists at Care Ratings said, "We expect the GDP growth for the first quarter of ongoing fiscal year i.e. FY18 at 6.5% at constant 2011-12 prices.

This growth is contingent on realization of Gross Value Added (GVA) growth at 6.3%."

Teresa John, Research Analysts at Nirmal Bang said, "We expect India’s gross value added or GVA growth to come in at about 6.2% for 1QFY18 while gross domestic product or GDP is likely to register 6.6% growth."

But, John believes serial shocks of demonetisation followed by the implementation of Goods and Services Tax or GST is weighing on the economy.

Citing the similar reason (GST uncertainties), Normura too expects  modest recovery in GDP growth at 6.6% in April - June quarter. 

Normura in its report mentioned that the pick-up in growth which was visible in March-end had lost some momentum towards end of June quarter on the backdrop of destocking and uncertainty from GST. 

This reading is higher compared to 5.6% GVA and 6.1% GDP growth registered in 4QFY17. 

However, last month, William Foster VP (Sovereign Risk Group) of Moody's Investors Services believes over the medium term, GST will contribute to productivity gains and higher GDP growth by improving the ease of doing business, unifying the national market and enhancing India's attractiveness as a foreign investment destination.

The GST will also support higher government revenue generation through improved tax compliance and administration.

On the other hand, analysts at HSBC expects GDP in Q1FY18 to be even lower compared to Q4FY17 numbers. 

HSBC in its report highlighted that higher private consumption and government spending is likely to be "dulled" by weak investment and exports growth over the quarter.

Thus, the global financial services major expects India's GDP at 6% in QFY18. 

Earlier on July 31, 2017, Moody's Investors Services and ICRA stated that positive impact of GST would help India's GDP accelerate around 8% over the next three-four years.

John said, "We expect a strong pick-up in activity in 2HFY18 as the shocks of demonetisation and GST fade away slowly."

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