India Macro Weekly: Growth forecasts lower, house price inflation subsides

For the three weeks up to January 6, 2018: 

• The Central Statistical Organisation (CSO) made a disappointing growth forecast of 6.1% for Gross Value Added (GVA) in 2017-18 as per its first advance estimates, on continued slowing in industrial growth and  despite a pickup in services growth. On the expenditure side, consumption spending is expected to soften, while investments are expected to improve from the previous year. 
• Inflation based on the House Price Index (HPI) declined further to 7.3% in Q2, 2017-18, the slowest in five quarters, though on a trend basis, prices still remain robust. Tier 2 cities are witnessing the fastest increases in HPI, while the metros still largely lead in terms of the absolute levels.
• Credit growth continued to inch up in November 2017, indicating that the upturn witnessed during the previous month was not a one off occurrence. At 8.3%, credit growth touched a 14 month high. 
• The core sector also showed relatively strong growth of 6.8% in November 2017, which is partly on account of a favourable base effect, but also reflects continued improvement in production levels.  
• External borrowings also came in strong at USD 3bn in November 2017, though they corrected from the highs seen during the previous month.