DH Poll: Economy needs 3-4 quarters more to recover

Majority of 16 economists polled by DH foresee Q2 GDP growth declining to 4.5%

As many as 15 economists out of 16 polled by DH, expect the GDP growth in the September-quarter to be in the range of 4.5%, down from 5% in the first quarter of this fiscal and 7% in the corresponding quarter last year.

The economic slowdown is likely to continue for at least 3-4 quarters more as the reform measures initiated by the government are unsatisfactory. The gross domestic product (GDP) growth is expected to have declined below the 5% mark to an average 4.5% during the second quarter of this fiscal, according to a DH poll of top economists.

A majority of the 16 economists polled are of the opinion that slowdown will continue owing to lack of policy measures by the government.  

Nine of them believe that the economy, which has been going through severe distress, will take multiple quarters to recover from the current slowdown.

As many as 15 economists out of 16 polled by DH, expect the GDP growth in the September-quarter to be in the range of 4.5%, down from 5% in the first quarter of this fiscal and 7% in the corresponding quarter last year. During the first quarter, it fell to a six-year low despite the government and the Central Bank taking many measures to boost the growth.

Madan Sabnavis of Care Ratings is of the opinion that the economy will take three to four quarters more to get out of this trap. "There are few signs of GDP growth picking up in the next two quarters and the rabi harvest and marriage season spending will hold clue to if growth can be maintained in the 5-6% range up to March. We may not expect any push from the government and private investment will remain just about stable with a wait-and-watch policy being pursued," he says.

Noted economist Govinda Rao, who has been a member of the 14th finance commission, believes that the economy will not recover until the government initiates serious policy reforms. He believes that GDP will grow at 5.2% on an annual basis, but sequentially he expects the growth to be around 0.1%. "This doesn't mean that the economy is doing well. The data which I have collated shows that during the June-September quarter of 2018, the GDP base was very low," he says.

SBI's Soumya Kanti Ghosh, who has put out the most conservative estimate of 4.2% GDP growth in Q2, expects the recovery to be three quarters away. "We expect the growth rate to pick up pace in FY21 to 6.2%. We also expect revisions to GDP data as in the past, but that is likely in February 2020 as is the custom," he says.

Yet another economist from an international institution, who wished not to be named, believes that the economic growth will further decelerate further to 3.5%. "The growth is contributed by labour, capital and gross productivity. And we know what is the position on all the three fronts," the economist said. 

Some believe that, based on corporate earnings, the slowdown has worsened, if anything. "Most of the sectors from auto to real estate are under stress and this is reflected in the profit margins of the corporate sector and revenue collections of the government. The slowdown has deepened and is now expected to remain extended than previously anticipated," Arun Singh of Dun and Bradstreet India said.
 

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