Uptick in services seen to push Q3 GDP mildly up: ICRA

Source : IANS
Author : IANS
Last Updated: Thu, Feb 27th, 2020, 16:02:06hrs
Uptick in services seen to push Q3 GDP mildly up: ICRA

New Delhi: A modest uptick in the momentum of services, industry and agriculture is seen to mildly step up India's gross domestic product (GDP) growth rate during the third quarter of FY20 sequentially, according to ratings agency ICRA.

ICRA expects the GDP and the gross value added (GVA) growth at basic prices to rise mildly to 4.7 per cent and 4.5 per cent, respectively, in Q3FY20, from 4.5 per cent and 4.3 per cent, respectively, in Q2FY20.

The macro-economic data point of the national income and the GDP will be released on Friday.

"Some industrial and service sectors displayed a pickup in YoY volume growth in Q3FY20 relative to the previous quarter, while the output of kharif crops displayed a mixed trend," Aditi Nayar, ICRA principal economist, said in a statement.

"Lower raw material costs, high growth of the government's non-interest revenue expenditure and the stable profitability metrics revealed by the earnings of some banks would provide a cushion to the pace of economic growth," she said.

According to Nayar, India's economic growth may display a mild improvement in Q3FY20 over Q2FY20.

However, the extent and duration of coronavirus outbreak would test the sustainability of the nascent upturn in growth in the ongoing quarter, it said.

The government spending could remain one of the key drivers of Q3FY20 growth, it added.

The ratings agency further said that

Several leading indicators of the trade sector, like air passenger traffic, foreign tourist arrivals, railway's freight revenue, diesel consumption and commercial vehicles' slaes, improved in Q3FY20 against weak performance in Q2FY20.

However, cargo handling at major ports and airports and service sector exports eased somewhat in the same period, it said.

"The mild narrowing in the pace of contraction in manufacturing volumes revealed by the
index of industrial production (IIP), combined with the cushion provided by lower raw material costs, suggests that the manufacturing GVA may record modest growth in Q3FY20, in contrast to the 1 per cent contraction in Q2FY20."

Moreover, the pace of contraction in mining narrowed in Q3FY20 against the previous quarter led by coal output, which should support a sequential pickup in GVA growth of mining and quarrying between these two quarters.

ICRA expects the electricity, gas, water supply and other utility services to report a contraction of 3 per cent in Q3FY20, which could be main drag on growth.