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Indian economy to grow at 7.3% in 2018-19: HDFC Bank report

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Mumbai: Economic growth is on an upward move as the twin impacts of demonetisation and GST implementation wane, and will accelerate to 7.3% next fiscal from 6.5% this year, says a report.

Improvement in private consumption, increase in capacity utilization and private capex cycle revival will be driving higher growth,a report by HDFC Bank’s economists said.

“We are optimistic about the growth outlook in FY19 as the recovery gains momentum and the effects of the note-ban shock and GST related disruptions fade... We expect GDP growth to pick up to 7.3% in FY19 from 6.5% in FY18,” its chief economist Abheek Barua said today, estimating the December quarter growth print to come at 6.9%. Real GDP growth will move upward to 7.2% in the last fiscal of 2017-18, it said.

It can be noted that India GDP growth rate had slipped to a three-year low of 5.7% for the first quarter and climbed up to 6.3% in the succeeding three months.

The report said there will be a slowdown in the agricultural sector growth, but it will be compensated by a faster surge in industries and services sectors. As the impact of GST rollout fades, the industrial sector, especially manufacturing, will see a rebound in activity, he said.

An uptick is expected on the services front as well on factors like a favourable base effect, recovery in most of the lead indicators like deposit and credit for banks, cargo handled at major ports, passengers carried by domestic airlines and foreign tourist arrivals, he said.

Agri growth, however, will be tepid at 1.5% for the third quarter because of a 2.8% dip in Kharif crop output, a lag in area under Rabi cultivation and an unfavourable base effect, it said. However, agriculture growth will accelerate to up to 4% in 2018-19 on a favourable base and assuming a normal monsoon, Barua said.

Rising farm output, coupled with higher minimum support prices announced by government are likely to improve farm incomes and rural consumption, it said.