THE COUNTRY’S gross domestic product (GDP) grew at the fastest pace in five quarters at 7.2 per cent in October-December, as against 6.5 per cent in the previous quarter and 6.8 per cent in the same period last year, helped by a sharp pickup in the services sector and a rebound in agriculture and manufacturing.
The second advance estimate, released by Central Statistics Office (CSO) on Wednesday, showed that the overall GDP growth rate for 2017-18 is estimated to inch up marginally to 6.6 per cent from the first advance estimate of 6.5 per cent released last month, but would be the lowest growth in four years.
GDP growth rate for July-September was revised upwards to 6.5 per cent from the earlier estimate of 6.3 per cent, according to the data released. The country had recorded GDP growth of 7.1 per cent in the previous financial year. Manufacturing, construction, financial services and agriculture were among five of the eight sectors that recorded a pickup in GVA growth in October-December as compared to the previous quarter.
Mining, electricity and trade communication were the sectors that bucked the trend. The GVA growth for the third quarter also benefitted from a favourable base effect, given that October-December 2016 was the first quarter to be hit due to demonetisation.
A perceptible increase in two components of GDP based on expenditure — Gross Fixed Capital Formation (which is a proxy for private investment) and valuables (including gold and precious stones) — was sharply evident in the surge in growth during the third quarter. Gross Fixed Capital Formation was up 12 per cent in the third quarter as against 8.7 per cent in the same period last year. For the full year, it is expected to decelerate to 7.6 per cent from 10.1 per cent last year.
A sharp increase was also seen in valuables, which grew 40.8 per cent in October-December over the same period the previous year. Economists attributed this rise to preference of savings in them in a low interest rate regime. “The rise in share of valuables is an area of concern. A trend of high gold imports could be indicative of the shift in savings towards valuables. Gold imports are now approximately in the range of 950-1,000 tn in a year, a level which was seen earlier when people invested in gold during high inflation period, but the trend seems to be continuing even now,” said India Ratings’ Chief Economist D K Pant.
“A 12 per cent growth in fixed capital formation pulled up GDP growth, the need of the hour is how we can nurture this budding investment revival with conducive policies. However, an area of concern is decline in private consumption growth to 5.6 per cent in Q3 of FY18 from 6.6 per cent in Q2 in FY18,” Pant added.
The advance estimate for Gross Value Added (GVA), the more closely watched indicator for growth, is estimated at 6.4 per cent in 2017-18, up from 6.1 per cent in the first advance estimates, but down from 7.1 per cent in the previous financial year. The GVA growth for 2017-18 is marginally lower than the 6.6 per cent growth rate projected by the Reserve Bank of India (RBI) in its sixth bi-monthly monetary policy review. The GVA growth rate for April-December, the first nine months of this financial year, slowed to 6.2 per cent from 7.5 per cent in the previous year, the CSO data showed.
In the October-December quarter, financial, real estate and professional services recorded a marked improvement, with the sector’s GVA growing at 6.7 per cent from 2.8 per cent in the same period last year. Construction also showed a sharp uptick with GVA growth of 6.8 per cent in October-December as against 2.8 per cent the previous year. Manufacturing retained the same level of growth of previous year at 8.1 per cent during October-December.
Mining and quarrying slumped into negative territory with GVA growth of (-)0.1 per cent in October-December from a double-digit growth rate of 12.1 per cent in the same period last year. Though the agriculture sector recorded an improvement in GVA growth to 4.1 per cent in October-December from 2.7 per cent in the previous quarter, the growth rate was sharply lower than 7.5 per cent in the same period in 2016-17.
The Finance Ministry said in a statement that the second advance estimates released by the CSO indicate a broad-based and significant acceleration of real economic activity as projected in the Economic Survey. It said the growth acceleration has been sectorally broad-based with manufacturing growth estimated at 8.1 per cent for Q3 2017-18, up from 6.9 per cent in Q2 2017-18; construction growth at 6.8 per cent in Q3 2017-18, up from 2.8 per cent in Q2 2017-18; and services growth projected to accelerate to 7.7 per cent in Q3 2017-18 from 7.1 per cent in Q2 2017-18.
“Such robust growth in manufacturing and significant acceleration in construction mark a turnaround in the country’s economic growth momentum,” the ministry said.