India’s largest lender also said in its Ecowrap report that the SBI Composite Leading Indicator (CLI), a basket of 21 leading indicators for the quarter in consideration, is showing a marginal declining trend.
“Consequently, the headline second quarter Gross Value Added (GVA) growth could be 7.3-7.4 per cent, due to the slowing of rural demand,” the report said.
GVA is the measure of national income and output that includes taxes and excludes subsidies.
As per the first-quarter (April-June) figures released earlier by the Central Statistics Office (CSO), India’s gross domestic product (GDP) had grown by 8.2 per cent.
“We also believe that the growth numbers in the second quarter will be helped by a weak base in the September quarter of 2017-18. We estimate that the base impact on second quarter GVA growth is around 30 bps (basis points). Based on tax collections, we subsequently expect second quarter GDP growth at 7.5-7.6 per cent,” said the report authored by SBI Chief Economist Soumya Kanti Ghosh.
It also said that commercial vehicle sales, domestic air passenger traffic and cement production have maintained double-digit growth during the second quarter, pushing up the quarter’s GVA estimate.
“The monthly data of various indicators for October 2018, however, suggest the GVA growth is slowing down due to decline in demand,” Ecowrap said.
“Of particular concern is that non-food credit, bank deposits and sale of passenger and commercial vehicles have slowed down as compared to previous month. Also, with a slowdown in government spending in the second quarter, the fiscal impulses to growth would now be clearly missing,” it added.
The report expressed “particular concern” about a global growth slowdown and “2019 could be the inflection point.”
SBI expects manufacturing GVA in the quarter in question to pick up further with better performance of listed companies.
“Overall manufacturing sector, which grew by 5.7 per cent in 2017-18, could now accelerate in the current fiscal with possible support from both crude oil prices and subsequent strengthening of the rupee,” it said.