SBI Research pegs Q3 GDP growth at low 5.8%; FY17 at 6.6%

The economy would have grown under-6 per cent in the third quarter, battered by the note ban, according to SBI Research. The Government will release the December quarter GDP print on February 28. “We expect the GDP growth to be decisively lower than 6 per cent in Q3 at 5.8 per cent and 6.4 per cent in Q4. Overall, our estimate for H2 is 6.1 per cent with a downward bias against CSO’s 7 per cent and the fiscal 2017 growth at 6.6 per cent,” SBI Research said in a report. The good news is that next year growth could move up faster if demand comes back faster post-remonetisation, it added.

The report said growth will be pulled down by the poor show by sectors like construction, real estate, cement and FMCG, which are likely to witness a decline in sales in Q3 and will recover thereafter.

A possible solace could be that the companies in the construction sector with a high share of Government orders are likely to be less impacted.

The report said if one went by current CSO (Central Statistics Organisation) estimate of 7.1 per cent for fiscal 2017, the Q3 and Q4 GDP growth would be around 6.1 per cent and 7.8 per cent, respectively, which is quite impossible given the extent of liquidity shock that has led to a drastic consumer spending shock.

The 7.1 per cent GDP estimate by CSO implies a 7.8 per cent GDP growth in Q4, which looks highly unlikely, the research outfit maintained.

It added that perhaps for the first time CSO will revise downwards its estimates on February 28 itself instead of in May.

According to CSO, GDP is likely to grow by 7.1 per cent in fiscal 2017 compared to 7.9 per cent a year ago.

RBI, on the other hand, estimated GVA growth at 6.9 per cent as against its earlier estimate of 7.6 per cent. Of this 70 bps reduction, 35 bps are attributed to demonetisation and the rest to base effect.

State Bank of India