New Delhi: India’s GDP growth in the September quarter (Q2) is expected to slow to 7.5%-7.6% over the previous three months mainly due to slowdown in rural demand, a report released by SBI Research said Monday. India’s GDP growth rate at constant prices (2011-12) stood at 8.2% in the April-June quarter (Q1) of 2018-19. The Central Statistics Office (CSO) will be releasing estimates for Q2 GDP growth on Friday.

The SBI Ecowrap report said SBI Composite Leading Indicator (CLI), a basket of 21 leading indicators for Q2 FY19, is showing a marginal declining trend. Consequently, the headline second quarter Gross Value Added (GVA) growth could be 7.3-7.4%, due to the slowing of rural demand, it said.

“We also believe that the growth numbers in the second quarter will be helped by a weak base in September quarter 2017-18. We estimate that the base impact on second quarter GVA growth is around 30 bps. Based on tax collections, we subsequently expect Q2 GDP growth at 7.5-7.6%," said Ecowrap.

One basis point equals one-hundredth of a percentage point.

According to SBI Ecowrap, commercial vehicle sales, domestic air passenger traffic and cement production have maintained double-digit growth during Q2. All these indicators pushed up GVA in the quarter. However, the monthly data of various indicators for October 2018 suggest the GVA growth is slowing due to decline in demand.

“Of particular concern is that non-food credit, bank deposits and sale of passenger and commercial vehicles have slowed down as compared to previous month," the report said. Also, with a slowdown in government spending in Q2, the fiscal impulses to growth would now be clearly missing, the report added.

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