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GDP growth rebounds to 6.3% in September quarter
Context
India’s economy regained momentum in the September quarter as the manufacturing sector shrugged off any teething impact from the July 1 implementation of the Goods and Services Tax to propel gross domestic product (GDP) growth to 6.3%
Recovery
- GDP growth in 2nd quarter: GDP growth recovered in the second fiscal quarter (July, Aug, Sept) from a three-year low of 5.7% in the preceding three-month period, while Gross Value Added (GVA) growth accelerated to 6.1% from 5.6% in the first quarter
- This quarter’s positive result has been impacted significantly by growth in manufacturing
- The manufacturing sector expanded by 7% in the quarter, a robust acceleration from 1.2% in the first quarter. Still, the pace was slower than the 7.7% seen in the second quarter of 2016-2017
Slowdown
- GDP growth for the first half of the financial year (April-September) was 6% compared with 7.7% in the year-earlier period. GVA growth was at 5.8% compared with 7.2% over the same period
Agriculture: Worst performer
- The sector that has performed worse is agriculture, which grew at 1.7% in 2nd Quarter. The performance in the agriculture sector has been held up by the non-crop sector. This year’s crop production, while higher than the five-year average, is lower than last year, which saw a strong growth
- The agriculture sector grew by 2.3% in the first quarter, and by 4.1% in the year-earlier period
Improvement in GFCF
- Gross Fixed Capital formation refers to the net increase in physical assets (investment minus disposals) within the measurement period. It does not account for the consumption (depreciation) of fixed capital, and also does not include land purchases
- It grew by 4.7% in the second quarter compared with 1.6% in the first quarter
Slowdown in services sector
There has been a slowdown in the services sector, especially finance, transport, and hotels, all of which saw growth slowing in the second quarter compared with the first quarter
- The possible causes could be the larger working capital requirements faced by services sector (especially export- oriented ones) and teething process issues post-GST implementation
