[ad_1]
What do you believe is likely to be the outlook when it comes to consumption growth because that is likely to lag this time around? How much of a concern is that?
Aurodeep Nandi: You are absolutely right, consumption growth is likely to lag. The anatomy of the growth outlook in Q3 of the fiscal year is going to be pretty similar to what it was in Q2. In Q2, growth was strong but much of it was driven by the government on the spending side and the government on the investment side. We had strong investments. We had strong government spending.
Unlock Leadership Excellence with a Range of CXO Courses
Offering College | Course | Website |
---|---|---|
Indian School of Business | ISB Chief Technology Officer | Visit |
IIM Kozhikode | IIMK Chief Product Officer Programme | Visit |
Indian School of Business | ISB Chief Digital Officer | Visit |
What seems to be lacking is growth on the consumption side and we think that that seems to recur in Q3 numbers. So, our number is still a strong 7.1% versus 7.6% in the previous quarter, but it is still a sequential slowdown. So, sequentially, we believe the momentum is going to be lower in this quarter, but the drag primarily is going to come from consumption.
The consumption side has been a problem for a while now. On the one side, we have a very K-shaped kind of recovery where the upper end consumers are essentially pushing a lot of the consumption growth and the other thing is that on the rural side, be it in terms of trade for agri, and for real rural wage, the growth has been moderate. As a result, consumption growth might be a bit better than last quarter but it is likely to remain weak overall.
Obviously you are talking about this K-shape recovery consumption side. That is the trend that has been going on for the last few quarters as well. Let us just talk and highlight in terms of the obviously industrial side, this industrial sector. What is the expectation on that front and how do you see that moving from here on in terms of the numbers that could come in?
Aurodeep Nandi: We think that the industrial sector should do pretty decently. We have a growth rate of around 12% vs 13.2% in the previous quarter. Essentially what is driving that is that profits are good and the reason why corporate profits are good is because costs have been relatively low as a result of which the profit margin has been good. What we are seeing is this dichotomy where sales are slowing but profit margins are good and which is showing up in terms of healthier industrial growth.
I want to know about the momentum from the construction side as well. What are you expecting there? Is any sort of a slowdown expected on that front? What is the growth one should watch out for?
Aurodeep Nandi: Construction, last quarter was done at tremendous rates. It picked up pretty sharply. This quarter, when we look at the high frequency indicators for the construction sector, we see that there has been some paring down of momentum. So, although construction activity is going to be a remarkably important part of the services basket, but the kind of momentum that we have seen in the previous quarter may not necessarily be recreated in this quarter. So, consumption growth is likely to moderate.What is the outlook when it comes to the individual sectors performing? Where do you see the biggest lag for growth and where will you see the overall growth picture looking robust?
Aurodeep Nandi: Overall, services should be fine. Our number is around 7.2% versus 6.7% in Q2. Within that financial services, real estate, professional services seems to have done fine. Credit growth, deposit growth have been good. Again, at the very start, government spending should be there and so the public administration side of it should be pushing it out. But I am a little wary of how trade, hotel, transport, communication which is quite closely linked to consumption momentum in the economy and how the construction sector will pan out. So, overall, services should do fine but internally. I would be a bit careful on the trade, hotel, transport, communication, and on the construction side. Within industries, as I said, industrial growth should be okay. We would be very surprised if that falls quite a lot. The other thing to watch out for is the agricultural sector. Now, the kharif production has been quite poor. It has been over minus 4% compared to the previous season and while rabi sowing has been fine, I think for some crops it has suffered. So, overall on the agri side, we do not expect strong boost coming from that sector either.
In terms of service sector growth that we are expecting, what could possibly lead the growth there?
Aurodeep Nandi: In services, trade, hotel, transport and communication are very important barometers of general consumption growth because that is a reflection of domestic demand. It is people like us going out, buying stuff, getting into taxis and planes, that provide an important barometer. The financial service, real estate, professional services should be relatively fine, that should be relatively strong in this quarter particularly with credit growth being fine. But in terms of the sector, the one thing to watch out for is trade, hotel, transports and also on the construction side which has been a major driver of growth on the GVA front.
[ad_2]
Source link