Lower crude price, Re to decide India GDP trajectory

Lower crude price, Re to decide India GDP trajectory

India's economic growth is expected to top 7% in the second quarter (July-September) this year on the back of a low base but the outlook going forward is likely be robust amid crude oil prices and currency fears, the two major headwinds for Indian economy, receding.

The Central Statistical Office (CSO) is expected to release the GDP numbers on Friday.

Although the growth numbers are expected to be lower than 8.2% in the first quarter (April-June). Weak global demand, high oil prices in most part of the year and a consumption slowdown in the both rural and urban India may have slowed the economy in the second quarter.

But the latest fall in crude oil prices and appreciation in the rupee has made analysts hopeful of India's GDP gaining momentum in the next quarter and also the full year ending March 31, 2019.

Oil prices stage a decline of late and are down 20% in 2018. Brent crude has moved below the psychological $60/ barrel mark, with that the rupee too expected to break above 70/dollar level.

Softer crude prices not only impact inflation in a favourable way but also give the much needed relief on interest rate front for the inflation targeting the RBI. A lower interest rate triggers a lot of activities by trade and businesses, enhances consumption and aides to economic growth.

Although the State Bank of India Ecowrap' report has suggested that non-food credit, bank deposits and sale of passenger and commercial vehicles have slowed down in October despite being festive season.

Therefore, all eyes are now on the G-20 meeting on November 30 in Argentina in which among other things, US and China are expected to discuss their trade tensions. Any indication of a thaw in their trade ties is expected to bring a cheer for the commodity space.

Muted commodity prices in China have impacted global growth and has had a spillover effect on India.