Growth still weak despite high GDP growth in Apr-June: Experts

Breaking a two-and-a-half year-old jinx, India’s economy logged 5.7 per cent growth in the April-June quarter prompting many to believe in an economic turnaround.

The fineprint of the gross domestic product (GDP) numbers, however, suggests that the economy remained broadly weak with subdued investment activity. Growth was mainly fuelled by sharp revival in government spends compared with the previous quarter.

A likely jolt to economic growth from the agriculture sector cannot be ruled out either, as the poor south-west monsoon has delayed kharif sowing by more than a month.

The sharp rise in growth in the April-June quarter was driven mainly by 9.1 per cent growth in community, social and personal services which is typically incurred by the government. Growth in this sector was a meagre 3.3 per cent in the previous quarter. This implied that spending by the new government picked up at a faster pace prompting first quarter GDP growth to accelerate by a single percentage point to a nine-quarter high.

National Statistical Commission Chairman Pronab Sen, however, looks at it differently. According to him, government spending was unexpectedly squeezed in the fourth quarter (January-March) last year making the number look relatively small.

“It was only because the previous government stopped releasing funds that growth in the community, social and personal services sectors fell sharply in the January-March quarter of last year. This is how the government was able to achieve its fiscal deficit target,” Sen told Deccan Herald.

He said, some of the increase in growth numbers could also have come from election-related expenses as seen in the rise in private consumption expenditure of close to 5 per cent in April-June from the previous quarter.