GDP growth breaks 5-Q slide
After sliding for almost five quarters, country’s economy has rebounded from a three-year low to swell by 6.3 per cent in July-September quarter. The Government data released on Thursday, no doubt, showed a positive sign of growth trajectory, overcoming teething troubles after the bumpy launch of Goods and Services Tax (GST). The data also showed that the gross domestic product or GDP numbers expanded due to accelerated growth of manufacturing sector in the country.
However, the growth of eight core-sector industries slowed to 4.7 per cent in October and agriculture growth slumped to 1.7 per cent. The country’s fiscal deficit crossed 96 per cent of Budget estimates at October-end. However, it is expected that the rebounding GDP could blunt Opposition’s attack on Prime Minister Narendra Modi for his “hasty GST launch”.
With the sign of growth trajectory, Finance Minister Arun Jaitley remained optimistic of a higher growth rate in coming quarters. “The last five quarters had witnessed a downward trend. This marks the reversal of this trend. This also indicates that perhaps the impact of two very significant structural reforms — demonetisation and GST — is behind us and hopefully in coming quarters we can look for an upwards trajectory,” he said after the Central Statistics Office released the GDP data.
Syncing with recent Moody’s upgrade of India’s sovereign credit for the first time in nearly 14 years, the growth buoyancy comes at a time when the Modi Government has been facing Opposition charges of wrong implementation of demonetisation and GST that disrupted the $2.4-trillion economy. On the other hand, Moody’s predicts that India would be the world’s seventh-largest economy to grow at 6.7 per cent in 2017-18 and at 7.5 per cent in the next fiscal.
The country witnessed the GDP growth of 5.7 per cent in April-June quarter, the lowest growth rate since Modi took over as PM, while it was 7.5 per cent in the September quarter of the previous fiscal. In the fourth quarter of 2013-14, economy had grown at 4.6 per cent.
Reacting to the GDP growth, Chief Statistician TCA Anant hinted that the numbers could be revised upwards as businesses uncertain of the new GST regime may have accounted for lesser taxes. “After the five quarters of growth decline, we see reversal of GDP in the second quarter,” he said.
Jaitley further said, “Government’s reforms to push economic growth are working, (and it) can be seen from that: manufacturing has shown robust growth of 7 per cent in Q2 and services at 7.1 per cent. Gross fixed capital formation has increased from 1.6 per cent in Q1 to 4.7 per cent in Q2.”
“The September quarter GDP growth, he added, is quite a significant trend reversal and has been driven by pick-up in manufacturing.
The Finance Minister further said, “The deceleration in overall growth witnessed since the first quarter of the last fiscal has been reversed and the economy now seems to have weathered the transitional challenges experienced earlier in the year and appears poised for a durable recovery going forward.”
“Traditionally, July-September is a quarter where a lot of production takes place to cater to festive demand. In the previous quarter, businesses were delaying production amid preparations for the GST launch,” he said, adding that the output in the September quarter is primarily for consumption and sales.
As far as the CSO data is concerned, agriculture growth slumped to 1.7 per cent, but the economic activities that registered growth of over 6 per cent in the second quarter of 2017-18 year-on-year are manufacturing, electricity, gas, water supply and other utility services, trade, hotels, transport and communication and services related to broadcasting.
Gross value added (GVA), a key input of GDP that is tracked by the RBI, rose 6.1 per cent in July-September compared to 5.6 per cent in the June quarter this year and 6.8 per cent in the September quarter of the last fiscal.
The expansion in GVA in the first half of the current fiscal has been estimated at 5.8 per cent, down from 7.2 per cent in the year-earlier period. The growth in agriculture, forestry and fishing was 1.7 per cent, mining and quarrying 5.5 per cent, construction 2.6 per cent, and financial, insurance, real estate and professional services 5.7 per cent. The growth in public administration, defence and other services also stood at 6 per cent.
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