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NEW DELHI: Finance Minister Arun Jaitley on Thursday said the rise in the GDP (Gross Domestic Product) numbers “indicated that the impact of demonetisaton and GST are behind us” and hoped that “an upward trajectory can be expected in the coming quarters.”
He also stated that the growth in manufacturing sector is primarily the reason behind this growth and the movement should be up in the third and the fourth quarter too.
India’s GDP growth rate for the second quarter (July-September) of the current fiscal stood at 6.3 per cent, government data showed on Thursday. The latest figures bring forth reasons for cheer as the country’s GDP had been sliding for the last five quarters. The previous quarter’s (April- June) growth rate at 5.7 per cent was at a three-year low. The GDP growth for the corresponding quarter last year stood at 7.5 per cent.
The GVA (Gross Value Added) to the economy in the reporting quarter stood at 6.1 per cent, up from 5.6 per cent in the last quarter.
The growth rate was widely expected to bounce back as there were clear signs of the businesses coming out of slowdown caused by demonetisation and the GST rollout. A Reuters poll of economists had predicted a growth rate of 6.4 per cent, while various other institutions projected the rate between 5.9 per cent and 7.1 per cent.
The surge came mainly on the back of mining and manufacturing sectors. The mining industry jumped from a negative growth of 0.7 per cent in last quarter to 5.5 per cent this quarter. Similarly, manufacturing grew from 1.2 per cent to 7 per cent. However, some sectors like agriculture, financing & real estate and transport and hotels have slowed down.
After the figures were declared, Tushar Arora, senior economist of HDFC Bank said, ” The GDP number is exactly in line with our expectations. Upbeat corporate earnings results have been reflected in the manufacturing sector.As the revival continues, we are likely to keep the annual (GDP) forecast unchanged at 6.5 per cent.”
Urjit Patel, governor of the Reserve Bank of India (RBI), had said last month that signs of an upturn were visible and growth was likely to top 7 per cent.
Other indicators like passenger vehicle and tractor sales, industrial production, electricity generation and rail cargo have all accelerated in the past few months. Big companies have also largely adjusted to the changes while benefiting from reduced logistics costs. Prominent Indian firms had their best profit growth in last six quarters in July-September, according to Thomson Reuters data. According to the data, Indian companies’ total profits are expected to grow 25% in the next fiscal year, which would be the highest in Asia.
However, concerns still remain on the consumption and private investment front which have failed to pick up despite the economy staging a comeback of sorts. Also, the finance ministry has been unsuccessful in convincing RBI for a cut in key policy rates. Analysts on the contrary say that rising global oil prices could pinch consumers through higher inflation and may instead force the RBI to hike the rates in the second half of 2018, denting growth momentum.
Speaking on RBI’s policy, Sumedh Deorukhkar, senior economist, BBVA, Hong Kong said, “We expect RBI to remain on pause in December and February, given upside risks to inflation as well as the fiscal deficit, exacerbated by rising oil prices and a gradually tightening global rates environment.”