Amid quiet domestic demand and weak investment activity, ratings agency ICRA has said it expects further deterioration in the growth of India’s Gross Domestic Product (GDP) to 4.7% in second quarter of current fiscal year (Q2FY20) from 5.0% in Q1FY20. It also forecast the country’s gross value added (GVA) at basic prices in year-on-year (Y-o-Y) basis to 4.5% in the quarter ending September of FY2020 against 4.9% in Q1FY20. It added that the agriculture and services may maintain the growth rate recorded in Q1.
ICRA said with subdued domestic demand, investment activity, and non-oil merchandise exports weighing upon volume expansion, manufacturing growth is expected to decelerate further from the marginal 0.6% in Q1 of FY2020. Heavy rainfall in August-September of 2019 along with the delayed withdrawal of the monsoon and constrained activities in the mining and construction sectors also contributed to a lower demand for electricity from the agricultural and household sectors.
In addition to that, muted industrial activity reduced the demand for electricity generation. The rating agency expects the Y-o-Y GVA growth of mining and quarrying, construction, and electricity, gas, water supply and other utilities to weaken in Q2 of FY2020. It also said various lead indicators of trade reveal a broad-based deterioration in Q2 of FY2020, which would weigh upon service sector growth in that quarter.