India's Q2 GDP growth jumps to 6.3 per cent, breaks five-quarter slide

Mail Today Bureau        Last Updated: December 1, 2017  | 09:16 IST
India's Q2 GDP growth jumps to 6.3 per cent, breaks five-quarter slide

India's economic growth bounced back in the July-September quarter to reverse a five-quarter slowdown as businesses overcame the teething troubles of the newly launched goods and services tax (GST) regime and shock demonetization of high-value currency. Gross domestic product (GDP) grew 6.3 per cent in the second quarter of 2017-18, its fastest pace in three quarters, data released by the Central Statistics Office (CSO) on Thursday showed.

Economic growth picked up from the three-year low of 5.7 per cent in the April-June quarter this year, but lagged neighbouring China's 6.8 per cent for the three months through September. The manufacturing sector grew at 7 per cent in the September quarter compared with 1.2 per cent in the previous quarter, according to the figures. The higher growth rate will generate more jobs in the economy for the young graduates passing out of universities and engineering colleges which in turn will create a higher demand for goods and services to spur growth further.

The pick-up in the economic growth rate also comes at a time when campaigning for the assembly elections in Prime Minister Narendra Modi's home state of Gujarat is in full swing. The private corporate sector growth, which has a share of over 70 per cent in the manufacturing sector, as estimated from available data of listed companies with BSE/NSE works out to 11.4 per cent at current during Q2 of 2017-18, CSO said. The growth in quasi-corporate and unorganized segment, which includes individual proprietorships and partnerships and khadi & village Industries, has a share of around 20 per cent.  

The economy has broadly moved past the disruptions encountered after a shock ban on highvalue banknotes in November 2016, economists said. GST was aimed at transforming India's 29 states into a single market but it has hit millions of small businesses due to complex rules and technical glitches. "Upbeat corporate earnings results have been reflected in the manufacturing sector," said Tushar Arora, senior economist at HDFC Bank.

The mining sector grew by 5.5 percent as compared to decline of 1.3 per cent in Q2 of 2016-17 as the production of coal went up by 8.6 per cent from a fall of (-)0.7 per cent in the previous year. The higher coal production also led to an increase in electricity generation resulting in the power sector posting a 7.6 per cent growth up from 5.1 per cent in Q2 of 2016-17.

However, the growth of the construction sector growth slowed to 2.6 percent as compared to growth of 4.3 percent in Q2 of 2016-17. Key indicators of construction sector, namely, production of cement and consumption of finished steel registered growth rates of (-) 0.4 percent and 4.1 percent respectively during Q2 of 2017-18 as compared to 3.4 percent and 6.5 percent respectively during Q2 of 2016-17.

Trade, hotels, transport & communication and services related to broadcasting sector grew by 9.9 percent as compared to growth of 7.7 percent in Q2 of 2016-17. Gross value added (GVA0 of the financial, insurance, real estate and professional services sector grew 5.7 per cent as compared to growth of 7.0 per cent in Q2 of 2016-17. Major component of this industry is the real estate and professional services which has a share of 75 percent.

The other indicators of this sector including aggregate bank deposits and bank credits have shown growth rates of 8.6 per cent, and 6.8 per cent, respectively as on September 2017 as against growth of 10.8 percent and 10.1 percent respectively as on September 2016.

PUBLIC administration and defence and other services from this sector grew by 6.0 per cent for Q2 of 2017-18 as compared to growth of 9.5 per cent in Q2 of 2016-17. The agriculture sector growth slowed to 1.7 per cent as compared to the growth of 4.1 per cent in Q2 of 2016-17. The production of foodgrains during the kharif season of agriculture year 2017-18 declined by 2.8 per cent as compared to the growth of 10.7 per cent during the same period in 2016-17, CSO observed.

Fiscal deficit at 96% mark

The country's fiscal deficit at the end of October went up to 96.1 per cent of the budget estimate for the full year (2017- 18), mainly due to lower revenue realisation and increase in government expenditure. In absolute terms, the fiscal deficit which reflects the amount by which the government expenditure has overshot its revenue collection, was Rs 5.25 lakh crore during April-October of 2017-18, according to data compiled by the Controller General of Accounts. For 2017-18, the government aims to bring down the fiscal deficit to 3.2 per cent of GDP.

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