Weak agriculture growth pulling down growth, says SBI

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Mumbai: While the domestic manufacturing and services sector appears to have shown robust growth during the April-June quarter, a report by SBI said that the gross value added (GVA) during Q1FY19 is likely to be pulled down by a weak agriculture sector growth. 

According to it, GVA growth could be around 7.6 per cent in the April — June quarter driven by impressive growth in manufacturing and service sector. 
“We still maintain that the agriculture sector needs an immediate intervention like Bhavantar scheme apart from the minimum support price (MSP) scheme recently launched. Agriculture prices continue to remain depressed and it is not clear how the MSP may lift prices in the absence of an effective procurement scheme,” the report said. 

Under the Bhavantar scheme launched in Madhya Pradesh, the government would pay the difference if the produce gets sold below the MSP.  

The report noted that the SBI Composite Leading Indicator (CLI) is signalling that the economic activity for Q1FY19 has picked up substantially and the GVA growth would be 7.6 per cent. The major indicators that are driving GVA are cement production, passenger traffic, sale of commercial vehicle and passenger vehicle, non-food credit growth and aircraft movement among others. 

The passenger vehicle sales growth, an indicator of urban demand has strengthened in last three months. Commercial vehicle sales growth also remained robust during the same period. Domestic air passenger traffic has maintained double-digit growth during April – June 2018. 

Sustained and continuous increase in cement production indicates that construction activity has picked up its pace and all these indicators are driving GVA in the Q1 of FY19. 

The report added that the corporate GVA, which decelerated since Q4 FY17 rebounded in Q1 FY19 and has exhibited positive growth of 8 per cent based on the performance of 3,956 listed companies. “In Q1, we are expecting manufacturing GVA to further pickup with better performance of listed companies in Q1. Overall manufacturing sector which grew by 5.7 per cent in FY18 will accelerate in FY19,” it said.