All eyes on the parliamentary session in India ahead of GDP data

Focus this week will be on the winter parliamentary session which gets underway on 26 Nov (Thu) and runs for nearly a month. While the contentious land and labour laws are likely to gain more traction at the state level, priority will be given to the key Goods and Services tax (GST) constitutional amendments and bankruptcy bills.      
In view of the setback at the recent state elections and possibility of stiff resistance on passage of these bills, the government has reached out to the opposition factions to gain support, notes DBS Bank. In this regard, inputs from a key GST panel are also awaited, which is likely to recommend a lower 18% revenue neutral rate according to the press. If confirmed, this will be lower than the 20-22% threshold discussed earlier. Progress on the bipartisan consultations meanwhile is likely to a long-drawn process. Executive reforms have been easier to execute than the legislative ones.

Early next week, GDP growth numbers for the Jul-Sep15 quarter (2Q FY15/16) fall due. "We expect real GDP growth is rise 7.3% YoY in the Sep15 quarter, from 7% the quarter before, but down from 8.4% in the corresponding period year ago," notes DBS Bank research. 

"Not all cylinders are firing at the same time, with growth likely to be more consumption-led rather than driven by investments. Firmer discretionary spending will do much of the heavy-lifting, with urban demand on the mend while rural spending remains subdued. Passenger car sales and modest recovery in durables production got a hand from easing urban inflation and lower financing costs. Higher public-sector wages will also be positive for consumption demand, when these are rolled out next year. Private consumption will likely rise 7.7% YoY in 2Q from 1Q's 7.4%."

"Investment spending meanwhile is likely to be driven mainly by higher public sector capital expenditure. The room for latter will however narrow next year as funds are re-channeled to meet a higher wage bill and banks' capital needs, while the windfall from low oil prices diminish. Industrial activity has also got a cyclical boost from higher capital goods and manufacturing output. Stark weakness in exports combined with weak imports will meanwhile keep the net exports position in red. Back to headline growth, it remains to be seen if backward revisions even out the divergence in the Jun quarter's real GDP and GVA growth rates."