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The 8.2 per cent growth registered by the economy in the July-September quarter is beyond expectations and projections. It is the highest growth rate achieved in the last six quarters, and much higher than the Reserve Bank of India (RBI) projection of 7 per cent. The consensus target of economists was about 7 per cent. The RBI had also projected 6.3 per cent growth in the second half, as steep United States tariffs began hitting exports and the production of export items. Growth in the corresponding quarter last year was 5.6 per cent, and even accounting for the lower base, the performance in the second quarter is remarkable. The first quarter had recorded a 7.8 per cent growth, and taken together, growth in the first half of this financial year stands at 8 per cent.
According to the Ministry of Statistics and Programme Implementation, the secondary sector grew by 8.1 per cent and the tertiary sector by 9.2 per cent. Manufacturing grew at a six-quarter high of 9.1 per cent, up from 7.7 per cent in the last quarter. Growth was aided by a low base effect, but there was genuine growth too. This was followed by the construction sector at 7.2 per cent. Financial, real estate, and professional services topped the tertiary sector, posting a nine-quarter high 10.2 per cent growth. Private final consumption expenditure, which contributes about 60 per cent of the GDP, posted a 7.9 per cent growth rate as against 6.4 per cent in the same quarter last year. Agriculture slowed to 3.5 per cent from the previous 4.1 per cent, but rural demand actually improved. Overall growth is particularly encouraging because the rise in consumption demand caused by the cut in GST rates is yet to be fully reflected in the growth figures.
There are, however, concerns and caveats too. There is continuing uncertainty about the trade deal with the US, though there are indications that it may be signed soon. The global trade outlook is weak. While the real GDP rate, which is adjusted for inflation, is higher than expected, the comparatively low nominal GDP rate is a matter of concern. It has also been pointed out that a recent IMF report accorded a low grade to India’s national accounts statistics. That casts a shadow on the reliability of the figures relating to economic growth. Festival demand clearly gave a boost to the growth figures, but it cannot be expected to continue. Private capital investment has still not taken off, and without that, there cannot be sustainable growth. So, the government’s revision of the full year growth estimate to ‘7 per cent or higher’ may be too optimistic.