GDP Data - Ms. Radhika Rao, India Economist, DBS Bank

Headline GVA and GDP growth estimates disappointed, despite fading impact of demonetisation. Of concern, two key factors that provided support in the Jun quarter - i.e. trade, hotels and transport sector that benefited from an increase in pre-GST sales, along with higher government participation reflected through the public administration sub-sector - are expected to moderate going forward. Some counter-support is, however, likely from an accumulation in inventories after a strong drawdown in the Jun quarter. In net, our full-year GVA estimate of 6.8% needs to be revisited.

On the demand end, consumption pick-up was more moderate than anticipated, suggesting spending was not materially front-loaded ahead of the GST implementation. Government spending remained robust, while private sector investments and manufacturing activity (weighed by low inventories and higher input costs) continue to be the weakest links in the growth story. These trends will prompt a downward revision in the RBI's GVA estimates, but we don't expect a kneejerk shift to an easing bias. A gradual rebound in headline inflation will keep them from imminent cuts, but the weakening demand trajectory certainly adds to the disinflationary trend in core trends.

Source : Equity Bulls

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