Reversing a five-quarter slide in GDP growth, Indian economy bounced back from a three-year low to expand by 6.3 per cent in July-September as manufacturing revved up and businesses adjusted to the new GST tax regime. The GDP growth in the second quarter of 2017-18 compares to 5.7 per cent in April-June, the lowest growth rate since the Narendra Modi government took office, and 7.5 per cent in the September quarter of the previous fiscal, showed government data released here today. In the fourth quarter of 2013-14, the economy had grown at 4.6 per cent. Finance Minister Arun Jaitley said the rise in second quarter GDP growth rate is durable and signals a reversal of downtrend seen over the preceding five quarters.
The economy, he said, now seems to have weathered the transitional challenges experienced earlier in the year and appears poised for a durable recovery, going forward. Sharing Jaitley’s optimism, Niti Aayog Vice-Chairman Rajiv Kumar said the growth bounce shows that the economy has come out of the woods, expressing hope that the full-year GDP will be between 6.5 per cent and 7 per cent. Economic Affairs Secretary S C Garg said growth at 6.3 per cent for the second quarter marks India resuming its path of higher growth. “Soon, we should be achieving 7 per cent plus and then 8 per cent plus growth with the transition to post GST getting completed. Fundamentals have strengthened enormously,” he tweeted.
Coming close on the heels of Moody’s recent upgrade of India’s sovereign credit for the first time in nearly 14 years, the second quarter growth buoyancy comes as a shot in the arm for the Modi government, which has been fighting off charges that demonetisation and GST launch disrupted the USD 2.4-trillion economy. Moody’s expects the world’s seventh-largest economy to grow by 6.7 per cent in 2017-18 and 7.5 per cent in the next. Briefing media on the CSO data, Chief Statistician T C A Anant hinted that the numbers could be revised upwards as businesses uncertain of the new Goods and Services Tax (GST) regime may have accounted for lesser taxes. After the five quarters of growth decline, “we see reversal of GDP in the second quarter”.
The latest number, Jaitley said, indicates that “perhaps the impact of two very significant structural reforms, demonetisation and GST, is now behind us. And hopefully in coming quarters, we can look for upward trajectory”. The CSO data shows that agriculture growth slumped to 1.7 per cent. Gross value added (GVA), a key input of GDP that is tracked by the Reserve Bank of India (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 RBI is scheduled to announce its next monetary policy review on December 6. 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 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. 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 stood at 6 per cent. India Inc said the economy is on a robust recovery path and may perform better in the second half of the current fiscal, as businesses adjust to GST. The finance minister also said the rate of growth of gross fixed capital formation in July-September at 4.7 per cent is encouraging and indicated that “investment is moving up”.
Meanwhile, key data on government finances showed that Centre’s fiscal deficit has crossed 96 per cent of budget estimates at the end of October. In absolute terms, the deficit totalled Rs 5.25 lakh crore during April-October of 2017-18, according to the data of the Controller General of Accounts (CGA). According to another set of data, released by the industry department, growth in eight core sector industries slowed to 4.7 per cent in October on an annual basis. The eight infrastructure sectors — coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity — had clocked a growth of 7.1 per cent in October last year. Together, they account for about 40 per cent of the country’ total factory output.