Ahead of the official release of the first quarter GDP readings later this week, German brokerage Deutsche Bank Markets Research has pegged the final print at an eight quarter high of 5.6 per cent saying a cyclical recovery has begun.

The optimistic report is drawn on the robust jump in first quarter IIP that rose to a three-year high of 3.9 per cent against —0.5 per cent in the final quarter of FY14.

“The robust pick-up in industrial sector GDP growth in the April-June period may push the headline GDP growth for the quarter higher by about 100 bps over 4.6 per cent reported in Q4 of FY15,” Deutsche economists Taimur Baig and Kaushik said in a report.

Robust second quarter

They sounded more confident about Q2, saying the recovery seen in 1Q seems to be continuing into July, with power demand rising 11 per cent (vs 0.7 per cent y-o-y), four-wheeler demand jumping 6.5 per cent against —7 per cent a year ago and most importantly, diesel consumption rising 6.3 per cent against a negative 1.1 per cent a year ago.

Stating that the government is focused on improving ground level execution than big bang reforms, the report admitted that for the first time since the polls, there are some signs of waning investor momentum.

No big bang reforms

But the report said this worry is misplaced as they see an urgent focus on policy execution, particularly focused on clearing stalled projects and in attempting to simplify and streamline the government processes and not unveiling big bang reforms.

The Environment, Power and Road Ministries and the Project Monitoring Group in the Cabinet Secretariat are currently at the forefront of execution, it said, adding: “In our view, an urgent focus on project clearances, simplifying regulation and streamlining approvals is far more critical in catalysing a manufacturing revival and create an environment conducive for a manufacturing turnaround.”

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