After a muted first quarter growth, the SBI Ecoflash report has raised concern about the second quarter gross domestic product (GDP) too, and has said that the growth is likely to remain below 6% in the second quarter of 2017-18 owing to muted agriculture growth and sluggish performance of manufacturing and mining sector. It said that “Second quarter growth numbers are likely to be muted, almost like the first quarter numbers (below 6%), and the reasons are many”, adding that the support that first quarter got from trade, hotel, transport and public expenditure will not be there in the second quarter.
The report noted the agriculture growth is expected to 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 and there was sluggish growth in manufacturing and mining sector. It further pointed that July index of industrial production (IIP) data showed that production was particularly weak in consumer durable goods and the exports growth has started coming down again after picking up for a few initial months in this calendar year. As per the report, high working capital requirement in the GST regime (based on principle of refund) is hurting the small manufacturers in particular.
While it estimated GDP numbers to remain muted at sub-6 percent for the July-September quarter, the third and fourth quarter growth is expected to be below 6.5 percent. The GDP stood at a three year low at 5.7% for April-June quarter of 2017-18, which the report said has raised concerns about the annual GDP numbers for the fiscal.