New Delhi [India]: The State Bank of India (SBI) on Thursday said that the growth in the construction sector which was pointed out in the latest estimates by the Central Statistics Office (CSO), will augur well for job creation.
“The growth in the construction sector in Quarter 3 has now touched a 24 quarter high. This will augur well for job creation as it shows that the government efforts in heavy lifting in investment activities in rural areas and the push to affordable housing is finally bearing fruit,” SBI said in a report drafted by SBI’s Economic Research Department.
According to the report, there were two numbers that surprised in the GDP narrative – agriculture and construction.
“Agriculture and allied activities grew at 4.1 percent in Q3 (7.5 percent). For FY18 also, agriculture is likely to show a growth rate of 3 percent in its GVA in FY18, as against the previous year’s growth rate of 6.3 percent, largely reflecting a robust performance of non-food-grain component,” the report stated.
However, as per the report, the narrative of decline in overall investment due to decline in capex may not be fully correct.
The data for previous years show share of household sector in gross fixed capital formation (GFCF) has declined to 31.8 percent in FY17 compared to 40.1 percent in FY15 and 32.1 percent in FY16. In general some revival in capital formation appears to be continuing, but at a slightly moderate rate. This is primarily in unorganised manufacturing.
However, household capital formation in dwellings has not recovered even in FY18 thus limiting a full scale revival in capital formation.
The Q4 GVA growth derived from annual and three quarters comes out to be 6.9 percent.
“We believe this will largely depend upon few factors. Now the Goods and Services Tax (GST) has stabilised and this will have positive impact on trade, hotel, transport, communication sector,” the report stated.
SBI also lists down the roadmap, going forward.
“The annual GDP estimates in the latest CSO data show that overall growth has/will moderate by 50 bps in FY18. Reasons for the moderation include slowdown in growth across all sectors except transport services and construction which have increased, possibly due to the impact of GST transition. Another reason which has caused moderation in the growth rate is the steep rise in imports at current prices by 13 percent owing to rise in crude oil prices but not matched by corresponding increase in export growth rates,” it concluded. (ANI)