Economic growth slows to 7% in April-June quarter

Reflecting a muted performance, the GDP growth slowed to 7 per cent in the April-June quarter, from 7.5 per cent in the previous quarter, amid deceleration in farm, services and manufacturing sectors.

A slower GDP growth, along with slower pace of industrial production expansion, however bolsters the case for a rate cut by the Reserve Bank.

The Gross Value Added (GVA), a new concept introduced by CSO to measure the economic activity, also slipped during the first quarter to 7.1 per cent, from 7.4 per cent a year ago.

The GDP grew at 7.5 per cent in the January-March quarter while it was 6.7 per cent in the April-June quarter last year, according to data from the Central Statistics Office (CSO).

The nominal GDP and GVA at current market price showed a steep decline in the quarter under review. The nominal GDP slipped to 8.8 per cent in Q1 from 13.4 per cent a year ago while the GVA growth rate nearly halved to 7.1 per cent from 14 per cent a year ago.

The government towards the beginning of the fiscal has projected a growth rate of 8.1-8.5 per cent in the current fiscal, which may be difficult to achieve.

RBI, which has cut interest rate by 0.75 per cent in three tranches since January, is scheduled to announce the next bi-monthly policy on September 29.

The data showed that the manufacturing sector GVA at constant prices (2011-12) rose 7.2 per cent in the April-June quarter as against 8.4 per cent in the year-ago period.

Similarly, the growth in the output of electricity, gas, water supply and other utility services decelerated sharply to 3.2 per cent as against 10.1 per cent a year earlier.

The farm and allied sectors grew at 1.9 per cent, down from 2.6 per cent in the previous year.

The output of mining and quarrying sector too slipped marginally to 4 per cent, from 4.3 per cent a year ago.

Financial, real estate and professional services growth shrank to 8.9 per cent as against 9.3 per cent a year earlier.

However, the construction activity registered an increase of 6.9 per cent, up from 6.5 per cent in the previous year.

According to the CSO data, GDP at constant (2011-12) prices in Q1 of 2015-16 is estimated at Rs 27.13 lakh crore, as against Rs 25.35 lakh crore in Q1 of 2014-15, a growth of 7 per cent.

Quarterly GVA at basic price at constant (2011-2012) prices for Q1 of 2015-16 is estimated at Rs 25.80 lakh crore, as against Rs 24.10 lakh crore in Q1 of 2014-15.

The GDP figure is derived by adding taxes and net subsidies to GVA at basic prices. GDP at current prices in Q1 of 2015-16 is estimated at Rs 32.43 lakh crore, as against Rs 29.80 lakh crore in the same period a year ago, a growth rate of 8.8 per cent.

GVA at Basic Price at current prices in the said period is estimated at Rs 30.30 lakh crore as against Rs 28.28 lakh crore last year, showing an increase of 7.1 per cent.

According to the data, the Gross Fixed Capital Formation (GFCF) at current prices is estimated at Rs 9.02 lakh crore in the said period as against Rs 8.69 lakh crore in Q1 of 2014-15.

At constant (2011-12) prices, GFCF is estimated at Rs 8.07 lakh crore in Q1 of 2015-16 as against Rs 7.70 lakh crore in Q1 of 2014- 15.

In terms of GDP, the rates of GFCF at current and constant (2011-12) prices during the first quarter are estimated at 27.8 per cent and 29.8 per cent, respectively, as against the 29.2 per cent and 30.4 per cent, respectively, in the June quarter of 2014-15.

Government Final Consumption Expenditure (GFCE) at current prices is estimated at Rs 3.86 lakh crore in the first quarter as against Rs 3.71 lakh crore in the year-ago period.