Economy grows 6.3% in Q2 after 15 months

Economy grows 6.3% in Q2 after 15 months

Reversing a downward trend of 15 consecutive months, India's economy grew 6.3% in the second quarter (July- September) backed by an acceleration in manufacturing and mining sectors but agriculture and construction, the two largest employers, continued to disappoint.

Buoyed by the overall improved GDP number, Finance Minister Arun Jaitley said, "perhaps the impact of two structural reforms – GST and demonetisation were behind us".

While manufacturing grew rapidly at 7% in the September quarter from merely 1.7% in the first quarter (April-June), the growth in electricity and other utilities was recorded at 7.6% and it was almost 10% in trade, hotel, transportation and communication. This sector was the most impacted one due to GST implementation.

The gross fixed capital formation, a leading indicator for investment in the country, grew 4.7% in the September quarter up from just 1.6% in the previous one.

The growth in the agriculture slowed to 1.7% compared to 2.3% in the last quarter and 4.1% in the same quarter last year. The growth in construction sector was projected at 2.6% compared to 4.3% in the same quarter last year.

Construction is the second largest employer after agriculture in the country and considering that most of the government expenditure which leads to construction growth has already taken place in the first half of the fiscal year 2017-18. This implies that there is little chance of further growth in the construction sector in the coming quarters.

In the services sector while trade, transport did well, the government finances grew rather slowly because of a muted deposit and loan growth in the banks.

The growth in country's net exports was flat on quarter-on-quarter basis at 1.2%. This prompted the Niti Aayog Vice Chairman Rajiv Kumar to urge the Reserve Bank of India to keep the currency weaker. A strong currency discourages exports.

The Gross Value Added (GVA) which is the total value of goods and services produced in the country after deducting the input cost accelerated 6.1% in the September quarter from 5.6% in the last quarter. It is the GVA number which the RBI tracks as its monetary policy input.

Jaitley said, "the economy now seems to have weathered the transitional challenges experienced earlier in the year and appears poised for a durable recovery going forward".

Chief Statistician T C A Anant said it was indicative of growth returning to normal levels.
India Inc expressed happiness over an increase in GDP to 6.3% from 5.7% in the last quarter and said as the GST settles down, the growth rate would be even higher.

Former finance minister P Chidambaram, however, said 6.3% growth was "far below the promise of Modi government and potential of the well managed Indian economy".

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