India: Q2 GDP likely to accelerate to 6.5% Y/Y - TDS

Analysts at TDS suggests that India’s Q2 GDP data (Q1 of FY2017/18) is due for release where consensus is looking for an acceleration to 6.5% Y/Y from 6.1% in the prior quarter, the slowest pace in over two years. 

Key Quotes

“There are two-way risks around the pace of recovery from demonetisation that played out more harshly than expected in Q1.  However, there are tentative signs of economic acceleration in the consumer sector and agriculture. Leading indicators support the view of recovering domestic private demand, while government spending is often frontloaded at the start of the fiscal year, suggesting more support could come from the public sector.”

“In contrast, investment remains weak as credit is growing slowly to allow banks to deal with the restructuring of bad loans on their books. The implementation of GST remains a big question mark, but its implementation started in July so broad effects will be visible from Q3. Similarly, the last RBI’s cut was delivered in August and will transmit into the real economy only in the coming quarters. On balance, stronger figures than in Q1 are likely today, but only to a limited extent, with still numerous sources of uncertainty playing out in both directions.”