Economics

Indian growth data disappoints again

Quickview: Indian GDP growth misses expectations again with agriculture and construction still dragging on performance

30/11/2017

Craig Botham

Craig Botham

Emerging Markets Economist

We still expect a recovery in Indian growth over the next two years, to 7%+ territory. However, it looks like the process may take longer than we first anticipated.

GDP and GVA below consensus expectations again in Q3

Both Gross Domestic Product (GDP) and Gross Value Added (GVA) disappointed again in the latest quarter’s data, with GDP growing 6.3% year-on-year (y/y) and GVA 6.1% y/y, both 0.1 percentage points below expectations.

This was at least an improvement on the 5.7% GDP growth and 5.6% y/y GVA growth the previous quarter, but it is a touch worrying that no amount of downgrading of expectations seems to suffice for Indian growth at present.

Manufacturing provides positive surprise

On the bright side, there was a positive surprise from the manufacturing sector, which has struggled this year. Recovery from disruptions related to the Goods and Services Tax (GST) may take a while longer, but it is reassuring to know that some damage has been repaired.

Trying to offer further reassurance, the statistics office also said that the GST had caused problems with estimating growth, such that the quarter’s growth is likely to be subject to upward revisions. So perhaps growth is not so weak as it first appears.

Agriculture and construction still struggling

Still dragging on the economy are agriculture and construction, both of which have suffered from the demonetisation policy and still seem to be struggling. It is harder now to blame this weakness on a policy from a year ago, and so also more difficult to ascribe this to transitory factors alone. Rural incomes will remain under pressure as a result.

Finally, government consumption was somewhat softer, inevitable after a frontloading of expenditure and probably unlikely to change much given the extra costs associated with the bank recapitalisation plan.

Important information: This communication is marketing material. The views and opinions contained herein are those of the named author(s) on this page, and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds. This document is intended to be for information purposes only and it is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Information herein is believed to be reliable but Schroder Investment Management Ltd (Schroders) does not warrant its completeness or accuracy. The data has been sourced by Schroders and should be independently verified before further publication or use. No responsibility can be accepted for error of fact or opinion. This does not exclude or restrict any duty or liability that Schroders has to its customers under the Financial Services and Markets Act 2000 (as amended from time to time) or any other regulatory system. Reliance should not be placed on the views and information in the document when taking individual investment and/or strategic decisions. Past Performance is not a guide to future performance. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested.  Exchange rate changes may cause the value of any overseas investments to rise or fall. Any sectors, securities, regions or countries shown above are for illustrative purposes only and are not to be considered a recommendation to buy or sell. The forecasts included should not be relied upon, are not guaranteed and are provided only as at the date of issue. Our forecasts are based on our own assumptions which may change. Forecasts and assumptions may be affected by external economic or other factors. Issued by Schroder Unit Trusts Limited, 31 Gresham Street, London, EC2V 7QA. Registered Number 4191730 England. Authorised and regulated by the Financial Conduct Authority.