Analysts say Q2 growth satisfactory

The Indian economy grew 5.3 per cent in the July-September quarter, less than the 5.7 per cent in the previous quarter, mounting pressure on Reserve Bank of India (RBI) Governor Raghuram Rajan to cut interest rates next week.

However, the latest quarterly GDP growth of 5.3 per cent was marginally higher than the 5.2 per cent growth recorded in the second quarter of the last fiscal year, official data released by the Central Statistics Office (CSO) on Friday showed.

This should augur well for the capital markets as the latest GDP print beat most economists’ and analysts’ expectations of growth being at 5 per cent or less.

“The 5.3 per cent growth has surprised on the upside. We had pencilled in a growth number lower than 5 per cent. This is a good sign and our earlier forecast of 5.8 per cent GDP growth for the whole year (2014-15) seems to be holding good,” Saumya Kanti Ghosh, Chief Economic Advisor, State Bank of India Group, told

The better-than-expected second-quarter GDP growth performance can be attributed to the ramp-up in mining and community, social and personal services output.

Saurabh Mukherjea, CEO of the institutional equities business of Ambit Capital, said 5.3 per cent GDP growth was a “positive surprise”.

“Most analysts, including us, were expecting the print to be around 5 per cent. Markets should take this positively. We reiterate our full year GDP growth target of 5.6 per cent,” he said.

Anis Chakravarty, senior Director, Deloitte India, said the second-quarter GDP number came marginally higher than expected.

Manufacturing languishing at 0.1 per cent sends a strong reminder that reforms are yet to kick in, he said.

While the growth in the agriculture and services sectors is in line with expectations, the subdued growth in manufacturing is a matter of concern, said FICCI President Sidharth Birla.

Recent FICCI surveys show that despite positive business sentiment, investors are still cautious about expansion due to subdued demand conditions and limited improvement in capacity utilisation levels, Birla said.

The most important element of the cost structure for manufacturing is interest rates, and given the current inflation situation, the RBI should ease the monetary policy stance as this would boost investment sentiment, he said.

“We look forward to further action on all the pending reforms, including early introduction of GST, changes to the Land Acquisition Act and further reforms in labour laws,” he added.

Assocham President Rana Kapoor expressed satisfaction over the second-quarter GDP performance. “This has completely been on expected lines and strengthens the cause for optimism of witnessing some economic recovery in the current fiscal year itself,” he said.

Chandrajit Banerjee, Director-General, Confederation of Indian Industry, said the RBI should review its status quoist approach and move toward paring interest rates in the upcoming monetary policy.

This should be done to give a fillip to recovery both through higher consumption spending and opening up channels for investment, he said.