Services, industrial sectors to spur GVA growth at 6.8% in Q3: ICRA

After a muted first half, the gross value added (GVA) growth is likely to improve to 6.8 per cent in the third quarter, helped by an improvement in the services and industrial sectors, a report said.
In the second quarter, GVA growth was at 6.1 per cent.
“We expect GVA growth at basic prices in year-on-year terms to print a sequential recovery of 6.8 per cent in third quarter led by the services at 8.8 per cent from 7.1 per cent and industry at 6.8 per cent from 5.8 per cent, even as growth of agriculture, forestry and fishing to 1.5 per cent from 1.7 per cent is likely to ease,” ICRA on Monday said in a report.
Headline GVA growth in the third quarter is likely to mildly exceed 6.7 per cent printed a year ago.
During the first half of this fiscal, economic activity remained muted, partly on account of the structural transition to goods and services tax but signs of a pick-up in growth are starting to appear.
The rating agency’s principal economist Aditi Nayar said that due to the higher growth in volumes in manufacturing, some of the services sub-sectors and in the government’s expenditure, a favourable base effect and an improvement in corporate earnings are expected to contribute to a sequential recovery in the year-on-year growth of GVA at basic prices in the third quarter.
Growth in the services sector is likely to record a base effect, led by pick-up, to nearly 8.8 per cent in the third quarter from 7.1 per cent in the second quarter, reflecting the improvement recorded by indicators such as bank credit, cargo handled at major ports, passengers carried by domestic airlines and foreign tourist arrivals.
A favourable base effect would continue to support volume growth in sectors such as manufacturing, construction, trade, hotels, transport, communication and services related to broadcasting and financial, real estate and professional services in the fourth quarter, the report said.
The rating agency expects GDP and GVA growth to improve to around 7.5 per cent in the fourth quarter.
Notwithstanding an expected pick-up in the second half, ICRA expects GVA growth to ease to 6.5 per cent in FY18 from 7.1 per cent in FY17, while GDP growth is expected to decline to 6.7 per cent in FY18 from 7.1 per cent in FY17.