Indian economy likely motored ahead in Q1 but now might coast

“On the domestic front growth should benefit from an acceleration in rural consumption supported by higher minimum support prices and a normal monsoon” Moody’s said

India has retained the fastest growing economy tag clocking a stellar 7.7 % in fourth quarter of the FY18.

"Rapid growth in agriculture (4.5%), manufacturing (9.1%) and construction sectors (11.5%) contributed to the overall growth", the Indian government said. Cambodia's growth rate for 2018 is expected to be 6.9 per cent, which is more or less consistent with its growth rate of 2017 (6.8 per cent) and 2016 (7 per cent). The GDP growth was 6.1 per cent in January-March 2016-17.

CII director general Chandrajit Banerjee said, "The significant expansion in GDP print has been powered by a broad-based upturn in farm output, improved manufacturing performance and a vibrant services sector".

The growth rate for 2017-18 was higher than the government's first and second advance estimates - at 6.5% and 6.6% - and in sync with what the International Monetary Fund, the World Bank and the Economic Survey had estimated.

In its May update of the Global Macro Outlook: 2018-19, Moody's cited higher oil prices and tighter financial conditions as the primary barrier to the growth rate.

The "agriculture, forestry and fishing" sector showed a growth rate of 3.4 per cent as against the previous year's growth rate of 6.3 per cent, while the growth in the "manufacturing" sector was estimated at 5.7 per cent as against the previous year's growth rate of 7.9 per cent. GVA calculates the growth without the impact from indirect taxes and subsidies.

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Mining and quarrying did not perform well in January-March as GVA of the segment grew at 2.7 per cent in the fourth quarter, down from 18.8 per cent in the year-ago period. It seems like we have moved beyond the teething troubles related to GST implementation.

The almost $1.7 trillion formal banking sector, which is coping with non-performing assets (NPAs) and emergence of fraud scandals, is worry point in the economy.

Economists are predicting a further pick-up in activity during the current financial year on the back of higher consumption demand, a stable GST and a surge in investment towards end of the year.

As per the report, India's current account deficit will increase. But private investment is not expected to boost growth significantly over the next few quarters, given the high level of slack capacity and lending constraints in the banking sector.

The growth in GVA was widespread led by public administration, which saw growth of 13.3 percent year-on-year. Some headwinds do remain from the perspective of rising crude oil prices, and unwinding of global easy monetary policy & rising interest rates.

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