India’s economy grew at the slowest pace in six quarters at 6.6 per cent in October-December, the third quarter of this financial year, dragged down by the base effect and a combination of weak manufacturing and farm growth, data released by Central Statistics Office (CSO) showed Thursday.
The overall GDP growth estimate for 2018-19 was also revised downwards to a five-year low of 7.0 per cent as per the second advance estimates released by government, against a 7.2 per cent growth estimated in first advance estimates for the full year released on January 7.
The quarterly numbers released Thursday is the last estimate to be published before the upcoming general elections later this year. The 7 per cent GDP estimate for the full year is sharply lower than the Reserve Bank of India’s projection of 7.4 per cent for this fiscal.
The downward movement in annual GDP comes on the back of a sharp upward revision in the growth numbers for the last fiscal — 2017-18 — to 7.2 per cent from the 6.7 per cent estimated earlier. GDP growth was recorded at 7.7 per cent in October-December quarter of the previous financial year.
The GDP estimates for previous quarters were revised downwards in the fresh data. As per the second advance estimates, GDP growth rate for April-June was estimated at 8.0 per cent and for July-September at 7.0 per cent, down from 8.2 per cent and 7.1 per cent respectively, as per the first advance estimates, the CSO said.
According to the new methodology followed by CSO, the GDP is calculated by adding product taxes to the Gross Value Added (GVA) at basic prices, and removing subsidies. Growth in terms of GVA at basic prices has been estimated at 6.3 per cent for October-December quarter as against 7.3 per cent during the corresponding quarter in previous financial year.
For 2018-19, GVA growth at basic prices is seen at 6.8 per cent in 2018-19 as against 6.9 per cent in previous financial year. “Agriculture, forestry and fishing” sector’s GVA (gross value added) growth is estimated to have sharply slowed to 2.7 per cent October-December as against 4.6 per cent in previous financial year, while that for manufacturing sector is estimated to have been 6.7 per cent in October-December as against 8.6 per cent in previous fiscal.
The construction sector, however, recorded a pickup with GVA growth of 9.6 per cent in the third quarter of this financial year as against 8.0 per cent in previous financial year.
For 2018-19, the GVA growth of ‘agriculture, forestry and fishing’ sector is estimated at 2.7 per cent as against 5 per cent in previous financial year, while that for manufacturing is estimated at 8.1 per cent, higher than 5.9 per cent a year ago. Mining and quarrying growth for the full fiscal has been estimated at 1.2 per cent as against 5.1 per cent in 2017-18.
Economic Affairs Secretary Subhash Chandra Garg said the GDP estimates for 2018-19 need to be viewed in the correct perspective of revised GDP numbers for 2017-18. Garg in a tweet said, “GDP growth at 7% does not indicate slowing down when compared to 7.2% of 1st Adv Est. This is on top of revised growth of 7.2% of 2017-18 as against growth of 6.7% per earlier estimate.”
Garg further said, “Sectoral GVA growth for 2018-19 continues to be very strong in manufacturing (8.1%), electricity, gas etc. (8%) and construction (8.9%). Performance of these sectors is also quite strong in Q3 as well with construction actually rising by 9.6%. Agriculture and mining slowed.”
In Thursday’s data, nominal GDP was also revised upwards which will help the government in meeting its fiscal deficit. GDP in nominal terms is now estimated at Rs 1.90 lakh crore compared with Rs 1.88 lakh crore estimated earlier. Economists said this would even help in achieving FY20 fiscal deficit/GDP ratio, though with low inflation it would be tough to achieve this level of nominal growth.