Friday, 21 September, 2018

GDP growth surges in third quarter

The finance ministry said the data indicates a broad-based and significant acceleration of real economic activity as projected in the Economic Survey GDP growth surges in third quarter
Nellie Chapman | 02 March, 2018, 11:14

"Importantly GST disruption is seen waning as borne out by manufacturing sector growth at 8.1 percent in October-December vs 6.2 percent in July-September".

Also, the fairytale 7.2 per cent growth pleases select watchers of the economic drama (read policy wonks), not the ordinary, whose lives may not change much, thanks to per capita income that's likely to grow at 5.2 per cent in FY18, lower than 5.8 per cent the previous year. The IMF's update, released in January, projects a 7.8 per cent growth rate for India in 2019.

The government has also revised its GDP growth forecast to 6.6 percent as opposed to 6.5 percent it had predicted earlier for the current fiscal year.

"I expect GDP growth for 2018/19 at 6.8 percent and I expect RBI to get into a longer pause, though its tone will remain hawkish".

But the impact of these major reforms appeared to recede in the three months to September as the economy bounced back to 6.5 percent, before climbing steadily again in this latest quarter. To be fair, the 7.2 per cent growth registered is still not setting the same pace achieved in FY17, when the growth rate had clocked in a neat 7.5 per cent.

Data released by the Central Statistical Office reveals that economic growth in the last quarter was faster than five quarters before that. "GDP growth rates for Q1 and Q2 of 2017-18 at constant prices are 5.7 percent and 6.5 percent respectively", Ministry of Statistics & Programme Implementation said in a statement. Unfortunately, despite a very favourable base effect, the "Financial, real estate and professional services" sector saw tepid growth, no doubt weighed down by the problems in the real estate sector.

Along with the increase in headline GDP, the gross value added measure stood at a reading of 6.7% - up from 6.2% in the previous quarter.

"If this is the case, GDP will reach near 7% in Q3FY18, which means Indian economy has recovered from GST and demonetisation shocks, and the Q4FY18 may even come in higher trend - which would mean the country will regain its spot in becoming fastest growing economy".

Factors in the downward revision included a greater slowdown by businesses in spending to build up their stockpiles and weaker business investment on structures and intellectual property.

Meanwhile, Mr Modi is trying to accelerate growth through higher state spending, including 2.1 trillion rupees (S$43 billion) for the recapitalisation of state banks, which are beset with mounting bad loans of almost US$148 billion. During the campaign, Trump promised to double growth, which has averaged a lackluster 2.2 percent annual average since the recession ended in mid-2009.