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“The release of the second advance estimate of GDP for FY19 (year ending March 2019) quantified the well-anticipated deceleration in economic activity,” note Standard Chartered analysts. “Global uncertainty, elevated crude oil prices (especially up to Q3-FY19) amid issues in domestic non-banking financial corporation (NBFCs), and uncertainties ahead of national elections in mid-2019 dampened economic activity.”  

Key quotes

“We expect GDP growth to improve in FY20 once election-related uncertainty has passed and the impact of financial tightening likely becomes less acute. However, with two quarters of GDP likely to print below 7% and a benign inflation trajectory, we expect the Monetary Policy Committee (MPC) to reduce the repo rate by 25bps to 6% when it meets in April.”

“H2-FY19 GDP slipped to 6.5% from 7.5% in H1, dragging down full-year growth: The impact of global and domestic uncertainty was evident in Q3-FY19 GDP growth, which slipped below 7%, the slowest rate since Q2-FY18 (Figure 1). Q3-FY19 GDP was 6.6%. Implied Q4-FY19 growth will likely stay at c.6.5%, pulling down H2-FY19 GDP growth to c.6.5%, almost 100bps lower than in H1.”