India's economic growth is likely to remain "soft" and the GDP is expected to grow by 6 per cent in April-June, down from 6.1 per cent in the preceding quarter, says an HSBC report.

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According to global financial services major, higher private consumption and government spending is likely to be "dulled" by weak investment and exports growth over the quarter.

"Repercussions of an early budget and the newly implemented Goods and Services Tax (GST) rates, receipts and rebates are likely to distort upcoming GDP readings," it said.

The report said the Gross Value Added (GVA) may be a more reliable measure of economic activity over the next few quarters amidst policy changes like the demonetisation episode (8th November 2016) followed by GST implementation (1st July 2017).

"Sandwiched between demonetisation, GST and other smaller policy changes, we recommend relying more on GVA as a measure of economic growth rather than GDP," it said.

"We expect GVA growth for the first quarter of this fiscal to come in at an improved but still soft 6.2 per cent, and GDP a tad lower at 6 per cent," HSBC said in a research note.

The report said the Union budget was released on February 1, about a month in advance compared to previous years. This allowed for faster approvals and front loading of certain expenditure, particularly subsidies.

Besides, until the new system settles down, the GST tax regime could lead to uncertainties in tax collections, it added.

"We expect first quarter GVA growth to recover to 6.2 per cent y-o-y, from 5.6 per cent in the demonetisation hit in the previous quarter," it said adding despite the improvement, growth is likely to remain soft. In fact growth has been falling singularly since mid-2016.

On the production side, agriculture and trade services are likely to be strong and manufacturing is likely to improve in line with IIP data. However, financial services is expected to remain depressed, it added.

 

(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)