ECONOMY | Staff Reporter, India

India's growth recovery feared to be not as robust as expected

Two reasons have been cited.

Standard Chartered maintains its GDP growth forecast for FY16 (year ending March 2016) at 7.4% and FY17 at 7.6% y/y, despite the higher-than-expected advance estimate of FY16 GDP at 7.6% y/y and Gross Value Added (GVA) at 7.3%.

According to a research note from Standard Chartered, the advance estimate, released by the statistics office, contains actual data for three quarters and extrapolates the fourth quarter’s data.

The first provisional estimate for FY16 GDP/GVA (based on actual data for all four quarters) is due in May 2016. Standard Chartered thinks the broader story of gradual recovery in FY16 remains intact, but the pace of improvement may not be as robust as suggested in the advance estimate, for two reasons.

Here's more from Standard Chartered:

First, based on the current GDP data for three quarters, 7.6% GDP growth for FY16 would require fourth-quarter growth of 7.7% y/y. While a similar growth rate was recorded in Q2-FY16, we do not think this will be replicated in the fourth quarter, as such growth would require household consumption growth of c.12% y/y, almost double the average of 6.1% in the first three quarters. This looks unrealistic to us.

We also read with caution the sharp slowdown in investment growth to a mere 2.8% y/y in Q3-FY16 compared with an average of 6.4% in H1-FY16. While we acknowledge that investment has not recorded a stellar rebound, the slowdown seems exaggerated.

Since we expect the government to cut government expenditure in the fourth quarter to meet its FY16 fiscal deficit target, a strong investment rebound might be difficult if the trend continues.

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