The Indian economy is estimated to grow at 7.2 per cent in financial year 2018-19, the fastest in three years, primarily on the back of higher industrial growth, with growth estimated to improve for manufacturing and construction sectors, the first advance estimates released by Central Statistics Office (CSO) Monday showed. The 7.2 per cent GDP estimate for the full year, however, is lower than the Reserve Bank of India’s projection of 7.4 per cent and also indicates a growth slowdown in October-March, the second half of this financial year.
During April-September, the GDP growth was recorded at 7.6 per cent. With GDP growth estimated to be 7.2 per cent for the full year, the GDP growth will work out to be 6.8 per cent for second half of this financial year.
Growth in terms of Gross Value Added (GVA) at basic prices is seen at 7.0 per cent in 2018-19 as against 6.5 per cent in previous financial year. The GDP growth rate in the previous financial year was recorded at 6.7 per cent.
The rise in GDP growth will also help the government in its fiscal deficit calculations as in nominal terms, the GDP growth is estimated at 12.3 per cent for 2018-19, much higher than 11.5 per cent growth estimated in the Union Budget for 2018-19. As per the advance estimates, the nominal GDP in absolute terms is estimated at Rs 188.41 lakh crore in 2018-19 as against Rs 187.22 lakh crore projected in the Union Budget for this financial year.
After the advancement in presentation of Union Budget to February 1, the CSO started releasing the first advance estimates in January for the purpose of incorporation in Budget calculations for next financial year.
Five out of eight sectors are estimated to record a higher growth in 2018-19 compared with previous financial year. GVA growth for manufacturing sector is estimated to rise to 8.3 per cent in 2018-19 from 5.7 per cent in 2017-18, while that for construction sector is estimated at 8.9 per cent, sharply up from 5.7 per cent in previous financial year.
Growth rate lower than RBI’s projection of 7.4%
GDP is estimated to grow at the highest level in three years to 7.2 per cent in 2018-19 driven by industrial recovery. Gross Fixed Capital Formation (GFCF), the proxy for investment growth, is also estimated to increase to 12.2 per cent in 2018-19, sharply higher than 7.6 per cent in 2017-18. The 7.2 per cent GDP growth rate for 2018-19, however, is lower than the Reserve Bank of India’s (RBI’s) projection of 7.4 per cent and also indicates a sharp slowdown in the second half of this financial year, a dampener ahead of the upcoming elections this year.
‘Agriculture, forestry and fishing’ sector’s GVA growth is estimated to inch up to 3.8 per cent growth in 2018-19 as against 3.4 per cent in previous financial year. ‘Mining and quarrying’ sector is, however, estimated to record a sharp slowdown with 0.8 per cent GVA growth in this financial year as against a GVA growth of 2.9 per cent in 2017-18. ‘Public Administration, Defence and other Services’ sector is estimated to grow at 8.9 per cent in 2018-19 as against 10.0 per cent growth in previous fiscal. As per the new methodology followed by CSO, the GDP is calculated by adding product taxes to the GVA at basic prices, and removing subsidies.
Gross Fixed Capital Formation (GFCF), a proxy for investment growth, is estimated to increase to 12.2 per cent in 2018-19, sharply higher than 7.6 per cent in previous financial year. Economic Affairs Secretary Subhash Chandra Garg termed the GDP advance numbers for 2018-19 as “very healthy”. “GDP grows by 7.2 per cent compared to 6.7 per cent in 2017-18. India remains fastest growing major economy globally,” he wrote on Twitter.
Garg further said, “Especially gratifying, impressive and promising is the growth in gross fixed capital formation (GFCF). 12.2 per cent real growth in 2018-19 compared to 7.6 per cent in in 2017-18 heralds excellent pick up in investment activity. GFCF as a ratio to GDP has risen to 32.9 per cent from 31.4 per cent in 2017-18.”