GDP Data May Show Weakening Growth in Q2: 10 Facts

The government will release the economic growth data for the July to September quarter on Friday. Economists say India's growth likely slowed down between July and September, which will be a setback for the government.

Here are 10 things to know about the important data point:

1) India's GDP likely grew at 5.1 per cent year-on-year in the September quarter (Reuters poll), sharply lower than 5.7 per cent in the June quarter, which was also the fastest pace of economic growth in 10 quarters.

2) A sharp slowdown in industrial growth likely impacted GDP growth during the September quarter, analysts say. Factory output averaged just 1.1 per cent between July to September as compared to the 4.6 per cent between April and June.

3) Slower government spending, exports and agricultural output may have weighed on growth. "These were the three reasons why the numbers overshot our expectations for the first quarter. And none of the three are expected to be supportive significantly for the next quarter," said Upasna Bhardwaj, economist at ING Vysya Bank.

4) Lack of reforms in the construction and manufacturing sectors hit capital investment in the country, analysts say. Reforms related to land acquisition, labour, coal and power sector are expected to be taken up in the current session of Parliament.

5) Capital-heavy sectors have overcapacity and there is no urgent need to invest in new plant or machinery, analysts say. Capacity utilisation fell to about 70 per cent in the June quarter from nearly 85 per cent three years earlier.

6) In September, credit growth hit a 13-year low, an indication of low demand and overcapacity in the economy.

7) If the data confirms a slowdown, it will be a big setback for the new government, which took credit for higher growth in the first quarter.

8) Citing weak growth, Finance Minister Arun Jaitley is likely to ask the Reserve Bank of India for a rate cut as soon as next week.

9) A nearly unanimous majority, however, expect Governor Raghuram Rajan to keep the repo rate unchanged at 8 per cent next week. The RBI has maintained that sustained government progress is needed to revive "the animal spirits" in corporate investment.

10) The slowdown in economic growth is unlikely to impact stock markets, which are trading at record highs. Analysts say GDP data is a lag indicator of the economy and markets have already factored in a 5 per cent growth in the September quarter.

(With inputs from Reuters)