Indian economy grew at 7.1 per cent in April-June of the current fiscal, its slowest pace in the last six quarters, mainly due to slower growth in construction and agriculture sectors and contraction in the mining sector, as per data released by the Central Statistics Office on Wednesday. Manufacturing and electricity growth pick up pace during the April-June quarter. The growth during the quarter is much lower than 7.9 per cent recorded in January-March and 7.5 per cent registered in April-June last year.
The previous low was 6.6 per cent GDP growth in the October-December quarter of the 2014-15. Gross Value Added (GVA), which is estimated at the basic price, showed a growth of 7.3 per cent in April-June of 2016-17. GDP is calculated by adding taxes to gross value added and subtracting subsidies.
“As expected, GDP growth fell short of the rate of GVA expansion in Q1 FY17, led by the sharp Y-o-Y rise in the food subsidy outgo of the Central government in the just concluded quarter, as opposed to the Y-o-Y decline in fuel subsidies that had taken place during Q1 FY16,” said ICRA senior economist Aditi Nayar.
Even as GDP growth slowed to a five-quarter low, growth of GVA at basic prices inched up to 7.3 per cent in Q1 FY17 from
7.2 per cent in Q1 FY16, bolstered by a sizable improvement in the growth of the services sector, Nayar said.
Department of Economic Affairs secretary Shaktikanta Das said the government expects economy to grow at close to 8 per cent in 2016-17 due to factors including good monsoon and impact of 7th Pay Commission award, as per a PTI report. “Given the good monsoon which we had this year, the 7th Pay Commission payout effect and various structural reform measures, which the government has taken we expect the growth to be higher than what we achieved last year (7.6 per cent), perhaps close to 8 per cent,” Das said.
While mining and quarrying sector contracted at 0.4 per cent in April-June, in contrast to 8.5 per cent expansion during same quarter previous fiscal, agriculture sector growth slowed to 1.8 per cent during the quarter from 2.6 per cent. Construction sector growth also slowed sharply to 1.5 per cent from 5.6 per cent.
Notwithstanding the boost from the aggregate rise in production of rabi crops (led by wheat), which were harvested in April 2016, the drought-like conditions that prevailed in April-June over much of the country, dampened the performance of the summer crops as well as the allied sectors, ICRA said.
Among the sectors that showed a pick up growth included manufacturing, wherein growth rate rose to 9.1 per cent from 7.3 per cent, while electricity, gas, water supply & other utility services registered growth of 9.4 per cent up from 4 per cent. Growth in public administration, defence and other services nearly doubled to 12.3 per cent.
Ficci president Harshavardhan Neotia said industry expects growth to gain momentum in the second half of the current fiscal year. “The good monsoon is a huge positive and an improvement has been noted in the kharif acreage. The agriculture sector performance is likely to pick up giving an impetus to rural consumption. Also, the seventh pay commission is expected to push demand,” Neotia said.