Q2 GDP growth to slow to 7.2 % on higher fuel prices,weaker rupee


What is Important?
From UPSC Perspectives
Prelims & MainsHighlights

Why in News?

The second quarter GDP growth is likely to be substantially lower than that seen in the first quarter of this financial year due to higher fuel prices and a weaker rupee.

Highlights:

  • GDP and Gross Value Added (GVA) growth to be 7.2% and 7.1%, respectively, in the second quarter of this financial year, down from the 8.2% and 8% respectively in the first quarter.
  • ICRA expects the growth of the Indian GDP and the gross value added (GVA) at basic prices in year-on-year (YoY) terms to ease substantially to 7.2% and 7.1%, respectively, in Q2 FY2019, from 8.2% and 8.0%, respectively, in Q1 FY2019, led by agriculture and industry, with the latter reflecting the impact of higher input and fuel prices, and a weaker INR.
  • The sequential decline in the year-on-year GVA growth in Q2 FY2019, relative to Q1 FY2019, is expected to be led by industry (to 7.1% from 10.3%) and agriculture (to 3.5% from 5.3%), even as the momentum for the services sector is likely to improve (to 7.8% from 7.3%).
  • Services sector growth is expected to rebound to about 7.8% in the second quarter from 7.3% in the first quarter, led by a sharp pickup in the expansion in the government’s non-interest revenue expenditure, a rise in growth of bank deposits, air and ports cargo traffic, as well as a moderation in the pace of FII outflows.
  • In contrast, indicators such as service sector exports, and the combined growth of commercial paper, corporate bonds and bank credit to large industries and services, recorded a decline in growth in Q2 FY2019 relative to Q1 FY2019.

Related Information:

  • The Index of Industrial Production and the available second quarter financial results of the corporate sector indicate an increase in activity in the manufacturing sector and increased revenue growth, the aggregate EBITDA [Earnings before interest, tax, depreciation and amortization] margins declined on a quarter-on-quarter (QoQ) basis.
  • An uneven and sub-par monsoon, flooding in some areas amid a late withdrawal of the monsoon rains, and instances of crop damage and pest attacks are likely to result in muted agricultural growth in Q2 FY2019.
  • Higher commodity prices may support a shallow recovery in the GVA growth in mining and quarrying from the marginal 0.1% in Q1 FY2019 to around 2.5% in Q2 FY2019, despite a slowdown in volume growth



Q2 GDP growth to slow to 7.2 % on higher fuel prices,weaker rupee Q2 GDP growth to slow to 7.2 % on higher fuel prices,weaker rupee Reviewed by The Hindu Current Affairs on November 21, 2018 Rating: 5

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