Finance Minister Arun Jaitley Friday said it was “absolutely clear that the economy is in recovery mode” after data showed that the economy grew at 7.3 per cent in 2014-15. The country posted a 7.5 per cent growth in the January to March quarter of the fiscal, outpacing China’s GDP of 7 per cent in that quarter.
But GDP data again underlined the divergence between manufacturing growth and industrial production numbers.
“Real GDP or GDP at constant (2011-12) prices in the year 2014-15 is now estimated at Rs 106.44 lakh crore (against Rs 106.57 lakh crore estimated earlier), showing a growth rate of 7.3 per cent (against 7.4 per cent estimated earlier) over the New Series/First Revised Estimates of GDP for the year 2013-14 of Rs 99.21 lakh crore,” an official release by the Central Statistics Office (CSO) stated.
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In 2013-14, the economy grew at 6.9 per cent.
Quarterly GDP data for the first three quarters of 2014-15 was also significantly revised in the provisional estimates. The first and second quarter estimates for GDP have been revised upwards to 6.7 per cent and 8.4 per cent in the provisional estimate from 6.5 per cent and 8.2 per cent in the advance estimate, respectively. The GDP data for the third quarter ended December 31, 2015 has however, seen a sharp downward revision to 6.6 per cent in the provisional estimate from 7.5 per cent in the advance estimate.
Rebutting former Prime Minister Manmohan Singh’s remark that the Indian economy was “fragile”, Jaitley said an economy growing at the fastest pace in the world cannot be fragile. “It is absolutely clear that the economy is in recovery mode,” he said. “Manufacturing sector is a silver lining.”
Stating that India had surpassed China’s growth rate, Arvind Subramanian, chief economic adviser to the Finance Ministry, said, “GDP numbers are encouraging. The data shows signs of pick up, both manufacturing and services have improved.”
Finance Secretary Rajiv Mehrishi, too, said that the pick-up in manufacturing was an encouraging sign.
Belying concerns over private sector investments, the data points to a rosier picture of the manufacturing sector, where gross value addition is estimated to have grown at 8.4 per cent in the fourth quarter of the fiscal and 7.1 per cent in 2014-15.
However, industry as well as the government is pitching for a cut in key rates by the Reserve Bank of India’s monetary policy review on June 2 to help improve investments and economic activity.
Earlier this week, RBI governor Raghuram Rajan met Jaitley, who has publicly favoured a rate cut, pointing to the fall in inflation.
“Slower farm growth has cooled down the GDP growth to 7.3 per cent while the manufacturing sector remains buoyant in contrast to the index of industrial production (IIP),” said D K Joshi, senior director and chief economist, Crisil. Joshi added that he expects a rate cut of 25 basis points by the RBI next week.
“The RBI takes into account a host of indicators, most of which at the ground level continue to show a weakness — be it credit, IIP, profit margins or private investments,” he said.
However, the CSO attributed the higher growth in manufacturing to the revision of the IIP growth of manufacturing to 2.3 per cent for 2014-15 as against the estimated growth of 1.6 per cent while compiling the advance estimates. “In addition, the corporate performance of the manufacturing sector has also been taken into account,” it added.
Agriculture grew at 0.2 per cent in 2014-15 as against 3.7 per cent in the previous fiscal, while mining and quarrying grew a mere 2.4 per cent compared to 5.4 per cent a year ago. In contrast, trade, hotels, transport, communication and services relating to broadcasting grew at 10.7 per cent, while financial, real estate and professional services grew at 11.5 per cent.