Comments by B Prasanna, Group Head – Global Markets – Sales, Trading and Research, ICICI Bank on GDP figures announced today

“The January-March quarter GDP suffered mostly from a sharp slowdown in industry. Additionally, the core GVA growth (ex-agriculture and ex-Government spending) has dipped to a multi-quarter low. As expected, consumption showed visible tepidity, while the substantial investment slowdown is worrisome. The lead indicators during the quarter had implied industrial sector stress on account of high costs of borrowing, increase in commodity prices and a slowdown in global trade. Weak rural activity indicators have also been impeding growth recovery as captured in low rural wages, slowdown in credit to medium scale industries and nascent recovery in two-wheeler and commercial vehicle sales. Acreage for the rabi crop was lower than last year, which has impinged on the agricultural performance. We expect consumption impulses to remain muted in the upcoming print, and recovery in the same will depend on the monsoons and the efficacy of the income schemes for the rural population. In light of this number, we expect some downside bias to our FY2020 growth estimate of 7.2% YoY, and the next print for Q1 FY2020 is also likely to be fairly weak. Against the backdrop of a benign inflation trajectory and sharp slowdown in growth, we expect the MPC to cut rates at the June meeting. The continued focus on reforms by the Government and easing financial conditions are likely to support growth in the second half of the current fiscal.”