GDP growth during the second quarter of the current fiscal is expected to remain below 6 per cent due to a downward trend in exports and muted growth in the agriculture sector, a State Bank of India (SBI) report said on Thursday.
The Gross Domestic Product (GDP) growth in the first quarter had fallen to 5.7 per cent, thus raising concerns about 2017-18 annual numbers.
“Q2 growth numbers are likely to be muted, almost like the Q1 numbers (below 6 per cent), and the reasons are many,” the “SBI Ecoflash” report, authored by Soumya Kanti Ghosh, SBI’s Group Chief Economic Adviser, said.
India’s exports growth started slipping again after picking up for a few initial months in this calendar year. From May onwards, the exports have been on the slope.
For example, the US imports of textiles and apparels have grown 30 per cent between April and July. However, Indian exports of apparel and textile to the US in July remained at the same level as in April with a modest increase in quantity.
“But the month of June saw a dip in both quantity as well as value. This is perhaps due to uncertainty before GST (Goods and Services Tax), which is likely to reflect in the coming quarter as well,” it said.
High working capital requirement in the GST (based on principle of refund) regime was another factor hurting the small manufacturers in particular, pointed out the report.
“The support that Q1 got from trade, hotel, transport and public expenditure will not be there in Q2. Agriculture growth will be muted as rainfall in the first three months of monsoon was hugely deficit in key foodgrain producing states like Uttar Pradesh, Punjab, Haryana and Madhya Pradesh. There was a sluggish growth in manufacturing and mining sector,” the report read.