Slackening industrial expansion is expected to pull down economic growth in the range of 8.1 to 8.5 per cent during July-September this fiscal from 8.8 per cent in the previous quarter, say experts.
The economic growth data for the July-September quarter is scheduled to be released on Tuesday. Indian economy, which had expanded 8.8 per cent in the previous quarter, is the second fastest growing large economy after China, which had registered a growth of 10.3 per cent in the April-June quarter and 9.6 per cent in the September quarter.
In the corresponding period last fiscal, the economy had grown by 8.6 per cent.
"We expect the GDP growth for second quarter to be 8.2 per cent. A slowdown in industrial demand and also high base of last year would bring down the numbers from that recorded in the previous quarter," HDFC Bank Chief Economist Abheek Barua said.
Experts said the persistent slowdown in the industrial production activity could dampen the growth prospects.
Factory output growth declined the most in 16 months to 4.4 per cent in September, reflecting a general slowdown in demand across sectors on the back of the successive monetary tightening moves by the RBI to rein in high inflation.
In the previous month as well, the industrial production expanded at a sluggish pace of 6.91 per cent, sharply down from 14.99 per cent in July.
As such, factory production grew by 8.69 per cent in the second quarter of this fiscal. "We expect Q2 growth at 8.5 per cent.
There has not been much agricultural activity during the quarter and industrial growth has also been slow," Axis Bank Chief Economist Saugata Bhattacharya said.
According to HDFC Bank estimates, the agriculture output is expected to grow by 4 per cent, industry by 8.7 per cent and services sector by 8.8 per cent. "We estimate real GDP was 8.1 per cent in Q2.
The likely softening in the GDP growth rate, despite a bounce-back in agriculture, reflects slower manufacturing growth and a high base," Barclays Capitals said in a research note.
However, valuing inflation in new base could push the GDP figures higher. "If the new deflator is introduced in calculating inflation, this could push up the GDP numbers. However, the impact will be difficult to ascertain," Barua said.
Deflators are used for converting GDP at current prices to constant prices. In the June quarter, agriculture and allied activities grew by 2.8 per cent and manufacturing expanded by strong 12.4 per cent.
The government expects the growth to top 8.5 per cent in the current fiscal. We expect the economic growth in the current fiscal to be at 8.7 per cent," Bhattacharya said.
GDP growth slowed to 6.7 per cent in 2008-09 from nine per cent in the previous three financial years due to global economic meltdown. However, government's stimulus packages and stepped-up public spending helped push growth to 7.4 per cent in FY'10.
