Moody's Cuts India's GDP Forecast To 7.3% From 7.5%

Analysts at Nomura explain that India's GDP growth rose to 7.7% y-o-y in Q1, in line with their expectations but above consensus from a downwardly revised 7% in Q4 - driven by impressive growth in investment and improvement in consumption growth.

As per data released by the Central Statistics Office (CSO), GDP growth in the fourth quarter was 7.7 percent, as against 5.6 percent, 6.3 percent and 7 percent respectively, in the first three quarters, backed by rapid growth in agriculture (4.5 percent), manufacturing (9.1 percent) and construction sectors (11.5 percent).

It also predicted a deceleration in China's growth rate, estimating a 6.6 per cent growth in 2018, down from 6.9 per cent in 2017.

Commenting on data, Finance Secretary Hasmukh Adhia said, "The constant increasing trend of quarterly GDP numbers in the four quarters of 2017-18 at 5.6 per cent, 6.3 per cent, 7 per cent and 7.7 per cent indicates that the structural measures of reforms undertaken by government is now bringing rich dividends in the form of higher GDP growth rate".

Experts believe that GDP growth in 2018-19 could get a boost from prospects of good monsoon which will further boost the agriculutural produce and farm output. India meets 80 percent of its oil needs from imports.

"I don't think we are revising our estimates or the forecast for the current year, which is about 7.5%".

"(It) seems like we have moved beyond the teething troubles related to GST implementation", said Tushar Arora, a senior economist at HDFC Bank.


Prices of petrol and diesel have surged to record highs in India as the worldwide crude oil prices hit $80 per barrel, pressuring the rupee and dubbing it Asia's worst performing currency.

Yet banking credit, a main source for corporate borrowing, remained weak following a surge in bad loans, as banks have been reluctant to extend new loans.

The research also indicated that the Goods and Services Tax (GST) may hamper the growth rate progress for a few quarters, however saying that the drawbacks will gradually moderate.

To add to that, India's almost $1.7-trillion formal banking sector is coping with $210 billion of soured or problem loans and fraud scandals have erupted at some regional banks.

Last year, it reported 6.1 percent growth in GDP for the fourth quarter of 2016-17.

"Domestic dynamics are very strong and external volatility won't derail the current economic recovery", noted Hugo Erken at Rabobank, one of the most accurate forecasters on India GDP, and whose view is that growth reached 7.7 percent on a normal basis, well above the 7.3 percent median.


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