Growth and headwinds

The pick-up in gross domestic product (GDP) growth to 7.8% in the first quarter was in line with signals from high-frequency data. The growth was quite broad-based, with hefty contribution from the construction and services sector. That said, we believe growth has peaked for this fiscal in first quarter and we will see moderation in the coming quarters. Looking at the supply-side GDP estimates – the more reliable measure - real gross value added grew at the same rate as GDP at 7.8% (vs 6.5% in the previous quarter). From the demand side, growth was driven by domestic segments, namely private consumption (6.0% vs 2.8%) and fixed investment (8.0% vs 8.9%).

On a positive note, the India Meteorological Department expects rains to pick up in September. Cumulative deficiency for the southwest monsoon season is coming down with some pick up in rains in September. But till September 26, cumulative rains were 6% below normal, which keeps it in the deficient category.