ICRA expects growth of gross value added (GVA) at basic prices to record a marginal uptick to 7.2% in Q4 FY2016 from 7.1% in Q3 FY2016. Moreover, GDP growth is expected to improve to 7.6% in Q4 FY2016 from 7.3% in Q3 FY2016.
Aditi Nayar, Senior Economist, ICRA Limited, said “We anticipate a marginal pickup in growth of GVA at basic prices to 7.2% in Q4 FY2016 from the initial 7.1% forecast by the CSO for Q3 FY2016. This follows from our expectation of a smaller drag emanating from the agricultural sector in Q4 FY2016 on a sequential basis, both on account of a mildly improved performance and a lower weight in aggregate GVA in line with seasonal trends.”
“If the expected uptick in GVA growth in Q4 FY2016 materialises, it would be in contrast to the slowdown in growth recorded in Q4 relative to Q3 in the previous three fiscals”, she added.
ICRA expects the performance of agriculture, forestry & fishing to improve somewhat in sequential quarters, to a growth of 0.2% in Q4 FY2016 from a contraction of 1.0% in Q3 FY2016, which was affected by the widespread shortfalls in production of kharif crops. Despite the late and relatively lower sowing of rabi crops in FY2016 as well as unfavourable rainfall and soil moisture levels, the Third Advance Estimates indicate an uptick in rabi production of wheat, oilseeds and pulses as compared to the final estimates for the previous crop season. However, considerable year-on-year declines are forecast for the production of coarse cereals and rice.
The weight of agriculture, forestry & fishing in aggregate GVA stood at 16.5% in Q4FY2015, considerably lower than the 21.0% recorded in Q3 FY2015. In line with seasonal trends, the anticipated dip in the weight of this sector in aggregate GVA in Q4 FY2016 as compared to the previous quarter, would moderate the drag exerted by agricultural activities on overall GVA growth.
Notwithstanding the healthy improvement in earnings in Q4 FY2016 (in nominal terms) reported by Corporates in some sectors, ICRA expects real manufacturing growth to have declined to 9.0% in Q4 FY2016 from the high 12.6% in Q3 FY2016, based on the y-o-y decline in volumes revealed by the IIP. Moreover, the narrower contraction of WPI inflation in Q4 FY2016 (-0.9%) as compared to Q3 FY2016 (-2.3%), would impact the GDP deflator.
Service sector growth is likely to have eased marginally to 9.3% in Q4 FY2016 from 9.4% in Q3 FY2016, following a contraction in services exports in Q4 FY2016 as well as a moderation in deposit and credit growth (including bank credit and commercial paper) at end-March 2016 relative to end-December 2015 in nominal terms. However, several lead indicators, such as air cargo traffic, tourist arrivals, diesel consumption and cargo handled at major ports, recorded an uptick in growth in Q4 FY2016 as compared to Q3 FY2016, which would support overall service sector growth.
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