5/12/2015
India / GDP
inShare.India’s growth in the 2014/15 fiscal year is expected to come in just a notch below the official forecast, but it would still have been one of the fastest growing economies in the region.
India’s GDP growth numbers for the final quarter of the 2014/15 fiscal year (January-March 2015) are due after market hours on Friday. Under the rebased series, we expect growth to slow slightly to 7.2% on-year from 7.5% in the 2014 December quarter. This will take annual growth in the fiscal year down a notch to 7.3%, compared to the 7.4% official estimate. Despite the small pullback in headline growth, India was among the fastest growing economies in the region last year.
The expenditure-side breakdown is likely to affirm that private sector investments lagged behind government spending. The investment cycle is likely to be revived by higher public sector capital expenditure this year, with the corporate sector to pick up the baton thereafter, as the removal of bottlenecks of stalled projects helps clear-up balance sheets and profitability gradually returns. The stock of stalled projects stood at 8.8 trillion rupees by end-2014, even as the average quarterly value of stalled projects was down by a quarter in the 2014/15 fiscal year. Household incomes have meanwhile benefited from falling prices, though moderate rural wage growth will see private spending rise 6.6% in 2014/15, lower than the estimated 7.1%.
Incorporating methodological changes, the manufacturing segment is likely to expand 8.5% from 4.2% in the December 2014 quarter. Agricultural (including forestry and fishing) output likely slowed after unseasonal rains damaged part of the winter crop. The highly weighted service sector output is likely to notch double-digit growth again, at 10.5% on-year in the March quarter, but ease from 13.5% the quarter before. The slower pace of government spending, in addition to lower indirect tax collections could be a drag. Growth in the financial, real estate and business services should find support from strong equity and real estate markets, but be offset by muted credit/deposit growth.
Growth is likely to quicken to 7.8% in the 2015/16 fiscal year on higher public sector participation and stabilisation in consumption spending. Downside risks could stem from the investment cycle, which has been slow to revive, and strength in rural spending, which will be dictated by the upcoming monsoon.
