How government's growth projections beat market estimates
MUMBAI: The government’s latest growth projections have sprung a surprise for many naysayers as the it has apparently defied the demonetisation blues, the country’s currency swap programme, which sucked out cash from the economy.
“The GDP estimate has surprised significantly on the upside,” said Yes Bank in a note. “It is likely that this estimate is only partially reflective of the demonetization impact as it is mainly based on indicators of the organized sector. Perhaps the most surprising aspect of the data release is that private consumption growth has been recorded at 10.1% in Q3FY17. “
The final estimate would be available only by January 2018, which incorporates data from the unorganized segment would reflect the full impact of the ‘currency swap’ process on the economy.
The Central Statistics Office on Tuesday projected India’s growth rate at 7 per cent for the current fiscal 2016-17, 7.3 per cent in the year after and 7.7 per cent in FY2019.
In a statement today, the CSO said, Agriculutre and allied sector growth estimated at 4.4 per cent in 2016-17, up from 0.8 per cent last fiscal. Advance GDP growth estimate for current fiscal pegged at 7.1 per cent, the same as projected earlier.
The optimistic figures, much better than market expectation, has now prompted financial institutions to revise their growth estimates.
“Clearly the demonetization impact has been negligible and concentrated in few sectors such as construction and real estate,” Care Ratings said in a note.
“Based on assumption of no downward revision in estimate for Q1, Q2 and Q3, we project GDP growth to be between 7.1-7.2% for the full year (as against 6.75% earlier) premised on growth of 7.3% in Q4.”
Some of the numbers beneath the surface however signify the impact of demonetization, according to Soumya Kanti Ghosh, Group Chief Economic Advisor - Economic Research Department, State Bank of India.
“For example, growth in Construction and Finance sub-segments are at 7 quarter low and at an all time low respectively in the current base year. But what is intriguing is that growth rates of these segments show a significant recovery in Q4,” he said.
“With cement dispatches for January 2017 declining by a whopping 13%, it is not clear how construction activity is reviving in Q4FY17.”
“The GDP estimate has surprised significantly on the upside,” said Yes Bank in a note. “It is likely that this estimate is only partially reflective of the demonetization impact as it is mainly based on indicators of the organized sector. Perhaps the most surprising aspect of the data release is that private consumption growth has been recorded at 10.1% in Q3FY17. “
The final estimate would be available only by January 2018, which incorporates data from the unorganized segment would reflect the full impact of the ‘currency swap’ process on the economy.
The Central Statistics Office on Tuesday projected India’s growth rate at 7 per cent for the current fiscal 2016-17, 7.3 per cent in the year after and 7.7 per cent in FY2019.
In a statement today, the CSO said, Agriculutre and allied sector growth estimated at 4.4 per cent in 2016-17, up from 0.8 per cent last fiscal. Advance GDP growth estimate for current fiscal pegged at 7.1 per cent, the same as projected earlier.
The optimistic figures, much better than market expectation, has now prompted financial institutions to revise their growth estimates.
“Clearly the demonetization impact has been negligible and concentrated in few sectors such as construction and real estate,” Care Ratings said in a note.
“Based on assumption of no downward revision in estimate for Q1, Q2 and Q3, we project GDP growth to be between 7.1-7.2% for the full year (as against 6.75% earlier) premised on growth of 7.3% in Q4.”
Some of the numbers beneath the surface however signify the impact of demonetization, according to Soumya Kanti Ghosh, Group Chief Economic Advisor - Economic Research Department, State Bank of India.
“For example, growth in Construction and Finance sub-segments are at 7 quarter low and at an all time low respectively in the current base year. But what is intriguing is that growth rates of these segments show a significant recovery in Q4,” he said.
“With cement dispatches for January 2017 declining by a whopping 13%, it is not clear how construction activity is reviving in Q4FY17.”
