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Global brokerages cheer India’s GDP Q3 GDP growth: 3 key takeaways

After India’s Q3 GDP growth came in at 7.2% in the Oct-Dec 17 quarter, backed by strong growth in key sectors like agriculture, construction and manufacturing, global brokerages HSBC, Nomura and CITI said that the economy is showing strong signs of revival. Apart from the data for eight core infrastructure sectors including coal, steel, cement and petroleum, showed improved growth of 6.7 per cent for January, from 3.4 per cent in the earlier month. Most notably, this is the fastest GDP growth clocked by the Indian economy in the five quarters, leading India to reclaim its status as the world’s fastest-growing major economy, surpassing China, after a gap of an year. We take a closer look at what top brokerages have to say about India’s GDP growth in Q3.

Strong signs of recovery

Notably, India’s GDP growth at 7.2% for the quarter under review compares with 6.5% for the same quarter a year ago, and 6.7% for the quarter ended September-17.Nomura says that a cyclical recovery is confirmed, but higher agriculture growth remains a puzzle. CITI notes that the GDP growth has rebounded after the shock of structural reforms such as GST and demonetisation begin to fade. HSBC says that the GDP rebound comes on the back of strong GST collections.

Slowdown in consumption, exports among key concerns

Notably, real growth in private final consumption expenditure has slowed down to 5.5% in the December quarter, from 6.6% for the quarter ended September-17. The research firm says that this slowdown is a key concern. Further, they have also raised concerns over the widening fiscal deficit, especially after export growth came in at 2.5%, while imports were up 8.7%, in real terms. Nomura notes that the cyclical recovery ahead is in the shadow of banking risks.

RBI may keep repo rate unchanged

Given the growth rebound, brokerages HSBC and CITI said that RBI may follow a neutral in the upcoming MPC meeting, while Nomura said that the growth rebound leads to a rate hike expectation. HCBC says that RBI will keep Repo rate unchanged at 6%.

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