Agri, mining pull down Q1 GDP growth

India registers 7.1% growth and outpaces China as the fastest

India’s economic growth slowed to 7.1% in the April-June quarter, pulled down by agriculture, mining and construction sectors’ performance, but manufacturing accelerated 9.1% reflecting ‘Make in India’ was still intact.

India also remained the fast-growing large economy outpacing China, despite a six quarter low gross domestic product (GDP) number in April-June. Analysts said that they were hopeful of pick up in economic growth going forward, mainly driven by an increase in consumption demand from rural areas after a good monsoon and the 7th Pay Commission rewards handed out to central government employees.

Official release of the data suggested that agriculture sector growth slowed to 1.8% in the first quarter, compared with 2.6% in the same quarter, last year.

Analysts were puzzled why a better raabi crop production did not reflect in the Q1 numbers. Mining sector contracted -0.4% in April-June, compared with a growth of 8.5% in the same period last year. Construction sector output too came down to 1.5% from over 5% in the same period last year. The early arrival of monsoon has hit the construction sector, according to economists.

Cabinet Committee on Economic Affairs, chaired by Prime Minister Narendra Modi on Wednesday, approved various measures to revive the construction sector which has been undergoing stress.

Electricity, gas and water output was up 9.4%, compared with just 4% last year. The services sector grew 9.6% as against 8.8% in the corresponding period of last year with trade, hotels, transport, communication and services related to broadcasting sector expanding 8.1%.

Going forward, the electricity production, especially hydel power, was expected to be better as the country’s reservoirs have been refilled by good monsoon rains. A major area of concern, however, emerged from the numbers thrown up by Gross Fixed Capital Formation (GFCF) which declined by 1.1% in April-June. GFCF denotes capital investment in the economy and indicates the actual investment activity on the ground.