India’s GDP growth slows to 7.1%, but retains fastest tag
India’s economy slowed to 7.1 percent in the July-September quarter of the year from 8.2 percent in the previous quarter on the back of a sharp drop in manufacturing, agriculture and mining activities, the Government data showed on Friday.
The GDP growth in July-September quarter is the lowest in three quarters but better than 6.3 percent in the same period of the previous year, helping the country retain the tag of the world’s fastest-growing major economy, ahead of China. The GDP growth had peaked to an over two-year high in the first three months of this fiscal, as consumption demand moderated and farm sector displayed signs of weakness. The Indian economy had grown by 8.2 percent in the first quarter of the current fiscal year that began in April, according to data released by the Central Statistics Office (CSO) Friday.
The Government, naturally, was disappointed but took comfort in the fact that the expansion was “robust and healthy” when the average rate for the first six months of the current fiscal are taken.
“GDP growth for second quarter 2018-19 at 7.1 percent seems disappointing.
“Manufacturing growth at 7.4 percent and agriculture growth at 3.8 percent is steady. Construction at 6.8 percent and mining at 2.4 percent reflect monsoon months deceleration,” Economic Affairs Secretary Subhash Chandra Garg tweeted.
The growth during April-September stood at 7.6 percent, which is “quite robust and healthy”, he said. “Still, the highest growth rate in the world”. The Ministry of Finance said the Q2 has seen a reasonable overall GDP growth.
“The growth in the second quarter is on a higher base compared to the growth of the first quarter…The Indian Economy is on track to maintain a high growth rate in the current global environment,” it added.
The Q2 growth of 7.1 percent keeps India ahead of China, which had expanded at 6.5 per cent. In gross value added terms, the CSO data said the economy grew at 6.9 percent in the Q2, lower than 8 per cent GVA growth in the first quarter.
While the GVA gives a picture of the state of economic activity from the producers’ side or supply side, the GDP projects the consumers’ side or demand perspective.
The International Monetary Fund, in its latest World Economic Outlook, has pegged India’s growth forecast for the current financial year at 7.3 per cent as the economy rebounds from the transitory turmoil of demonetization and GST implementation.
Chairman of the Economic Advisory Council to Prime Minister (EAC-PM) Bibek Debroy said GDP estimates are a reflection of the government’s successful policy efforts in maintaining a stable domestic environment despite global uncertainties.
The Gross Fixed Capital Formation as a ratio of GDP has increased by almost 1.3 percentage points on yearly basis. The exports for second quarter have grown by 13.4 per cent.
The Government consumption for the quarter has also significantly increased by 12.7 per cent.
GVA growth in the agriculture sector (including forestry and fishing) slowed to 3.8 per cent from 5.3 per cent in the previous quarter.
Commenting on the data, Group Executive and Head (Global Markets Group), ICICI Bank, B Prasanna said: “We had only expected the growth to slow down meaningfully from Q3 onwards, especially given that the base effect in Q2 was fairly supportive.”
Chief Economist with India Ratings and Research (Fitch Group) Devendra Kumar Pant said 2018-19 may still end up with a GDP growth of 7.3 per cent.
Meanwhile, data released by the Controller General of Accounts (CGA) showed the full-year fiscal deficit target of Rs 6.24 lakh crore was breached at October-end mainly on account of lower revenue collections, reflecting deterioration in public finances.
The fiscal deficit or gap between expenditure and revenue was Rs 6.48 lakh crore or 103.9 percent of the Budget Estimate (BE) during April-October of the current financial year. At end of October 2017-18, the deficit was 96.1 percent of the BE.
The government has budgeted to cut fiscal deficit to 3.3 percent of GDP in 2018-19 from 3.53 percent in the previous financial year.
Another set of official data showed that the growth rate of eight infrastructure sectors slowed down to 4.8 percent in October due to contraction in the production of crude oil, natural gas, and fertilizers.
The eight infrastructure sectors of coal, crude oil, natural gas, refinery products, fertilizers, steel, cement, and electricity had grown by 5 percent in October 2017.
Fertilizer production dropped sharply by 11.5 percent, crude oil by 5 percent and natural gas by 0.9 percent in October over the year-ago month, according to the data released by the Commerce and Industry Ministry on Friday.
The production of coal, cement, and electricity, on the other hand, expanded in the month under review.
During April-October 2018-19, the eight sectors recorded a growth rate of 5.4 percent against 3.5 percent in the same period last year. Read more posts…