Rise in Q2 GDP signals economic recovery: India Inc

03 December, 2017, 01:16 | Author: Gladys Mathis
  • Credit Reuters

India's economic growth pace picked up to 6.3 percent in the three months ending in September, halting a five-quarter slide as businesses started to overcome teething troubles after the bumpy launch of a Goods and Services Tax (GST). The country's fiscal deficit crossed 96 per cent of Budget estimates at October-end.

GST has consolidated central and local taxes including value added tax, excise and service tax into a single levy.

To scale to 10 per cent rate is "very challenging" and it will not depend on domestic factors only but on how the world is moving, he said.

Moody's Investors Services recently upgraded India's sovereign rating for the first time in almost 14 years, saying the country was poised for fast growth because of wide-ranging economic and institutional reforms by Prime Minister Narendra Modi's government.

Government spending slowed in the quarter, growing 4.1 per cent, as against 17.1 per cent in the June quarter.

According to Central Statistics Office (CSO) data, the economic activities that registered growth of over 6 percent in the second quarter are manufacturing, electricity, gas, water supply, other utility services and trade, hotels, transport and communication, and services related to broadcasting. "Gross fixed capital formation has increased from 1.6 per cent in Q1 to 4.7 per cent in Q2".

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Underlining the strong fundamentals of the economy, Finance Minister Arun Jaitley on Thursday said India has standardised itself for a growth rate of seven per cent to eight per cent.

Reversing the five quarters of slowing GDP growth, Indian economy expanded by 6.3 per cent in July-September on the back of a pick-up in manufacturing.

While manufacturing grew 7 per cent in the second quarter against 1.2 per cent in the first, services sector growth showed a significant decline to 7.1 per cent from 8.7 in the previous quarter on account of the muted performance of financial, insurance and real estate sectors.

GDP growth in the first half of the fiscal stood at 6 per cent versus 7.7 per cent in H1 previous year. "It's possible that anticipating the need for the festive season, most of the production went into the sale and inventory restocking may happen later...inventory accumulation effect may persist in the third quarter as well", he explained.

TMC chief and West Bengal Chief Minister Mamata Banerjee was, however, more vocal in her criticism and claimed that a growth of 6.3 per cent was "no growth".

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