JOIN USThe production growth in India’s eight key infrastructure sector slowed to 1.1 per cent while the government’s expenses overshot its revenues to reach up to 70 per cent of the full-year target and the economy grew only seven per cent in the first three months of the fiscal as against a 7.5 per cent in the last quarter (Jan-Mar). The disappointing data-packed Monday had it all.
Despite that India made a strong pitch for a rating upgrade before Standard & Poor's on the same day saying the economy was expected to grow by eight per cent in the current fiscal (2015-16).
According to the data released by the government, the growth in key sectors such as agriculture, industry, manufacturing and mining slowed year-on-year taking the overall gross domestic product (GDP) number to a lower seven per cent.
The Gross Value Added (GVA) too slowed in the Apr-Jun period to 7.1 per cent from 7.4 per cent in the same period last year. GVA is a new concept introduced by the government to measure the economy. The current GDP growth data is calculated under the new methodology that the government moved to last year.
While agriculture grew at 1.9 per cent in the first quarter as against 2.6 per cent growth in the same quarter last year, manufacturing slipped to 7.2 per cent in the same period against 8.4 per cent last year. The mining sector grew only 4 per cent this year. Last year in the same period the growth was marginally up at 4.3 per cent. Electricity and gas output growth slowed sharply to 3.2 per cent from 10.1 per cent a year ago. The industry as a whole slowed to 6.5 per cent in first quarter from 7.7 per cent in the same quarter last year.
The slowdown in industrial growth came despite a series of measures taken by the government such as ‘Make in India’, power and mining sector reforms, and ease of doing business to re-ignite the economy.
The finance ministry has projected GDP growth of 8-8.5 per cent for 2015-16. But international rating agencies have cut the growth forecast in the past. Recently, Moody’s pared India’s economic growth forecast for this year to seven per cent from 7.5 per cent earlier. Fitch too had cut country’s GDP growth forecast prior to Moody’s.
The Finance Ministry, however, made a strong case before S&P for an upgrade. In a presentation before S&P officials, Chief Economic Adviser Arvind Subramanian is believed to have said that India has a strong medium term growth potential and the present growth rate was ‘below potential’. Separately, two other data points also flagged concerns about a faster economic recovery. The output growth in eight key infrastructure sector came to a three-month low of 1.1 per cent in July, mainly triggered by a dip of 2.6 per cent in steel sector.