India's economic growth likely recovered from a three-year low last quarter as businesses started to get used to India's new tax regime.
Gross domestic product likely expanded 6.4% from a year earlier in the three months ended Sept. 30, according to the median estimate in a poll of 11 economists by The Wall Street Journal. That compares with a 5.7% expansion in the preceding quarter, which was the slowest expansion since the start of 2014. The latest GDP figures are scheduled to be announced on Thursday.
"We expect a mild pick-up in growth on the back of normalizing growth in industry as manufacturing gradually recovers from the Goods and Services Tax-related short-run disruptions," HSBC said in a research note.
Confusion due to a multiplicity of taxes and complicated filing procedures under the goods-and-services tax regime prompted businesses to slash output and clear out inventories ahead of its launch. Production picked up once the new tax was rolled out in July.
While it may still take more time for businesses to fully adjust to the new system, next year should be better, said D.K. Joshi, chief economist at Crisil, a unit of Standard & Poor's.
"By that time, the effects of demonetization effect would have disappeared and GST would have stabilized, creating more certainty for businesses," he said.
Higher government spending on rural development and big pay increases for state employees are also expected to help growth accelerate to about 7.5% in the next few quarters, according to some economists.
"There are definite signs of a recovery," said Gautam Singh, an economist at Spark Capital, citing strong growth in tractor and two-wheeler sales.
Write to Anant Vijay Kala at email@example.com.
(END) Dow Jones Newswires
November 28, 2017 04:45 ET (09:45 GMT)