India's Q2 GDP growth hits 7.4% on high factory output

Dec 03, 2015

Agriculture sector grew at 2.2%, higher than the 2.1% growth witnessed in the year-ago quarter.

 

 

The Indian economy picked up in the second quarter ended September 2015 and grew at 7.4 per cent during the quarter on the back of strong growth in manufacturing, trade, hotels, transport & communication services. Even the agriculture sector grew higher than the growth achieved in the same quarter last year.

The strong GDP growth data comes a day ahead of RBI’s monetary policy review meeting on Tuesday, though experts say that the central bank is most likely to keep the interest rates in the economy unchanged.

While the economic growth for the quarter outpaced the growth of the Chinese economy that expanded by 6.9 per cent in the quarter ended September 2015, the growth comes on expected lines and provides a gentle push to the economy.

The agriculture sector grew at 2.2 per cent, higher than the 2.1 per cent growth witnessed in the corresponding quarter last year and significantly higher than 1.9 per cent growth seen in the quarter ended June 2015.

The biggest growth over the previous year was seen in manufacturing sector and trade, hotel, transport, communication & services related to broadcasting as the two segments grew much faster than their growth in the corresponding period last year.

While manufacturing grew at 9.3 per cent as against 7.9 per cent seen in Q2’15, the trade, hotel, transport, communication & services related to broadcasting grew at 10.6 per cent as against 8.9 per cent in the same quarter last year. Economists say that that growth comes on expected lines and provides a gradual push to the economy.

“The index of industrial production has been growing over the last few months and there has been a rise in urban demand which has led to a rise in manufacturing growth. The automobile sector and the consumer durable sectors have witnessed growth. Rural growth, however, remains a concern,” said DK Joshi, chief economist at Crisil.

While RBI has cut the interest rate by 125 basis point in this calendar year, experts say that the benefits of rate cut have not kicked-in yet and it takes roughly 3-4 quarters for that.

Even though the financial, insurance and real estate segment grew by 9.7 per cent during the quarter, the growth was slower than that witnessed in Q215 when it stood at 13.5 per cent.

The bad news came on construction segment, defence and utility services such as electricity, gas,water supply. While the growth of construction slowed down from 8.7 per cent in September 2014 to 2.6 per cent in September 2015, the growth in utility services declined from 8.7 per cent to 6.7 per cent.

As the government is engaged in discussions with the main opposition party – Congress – to pass the Goods and Services Tax Bill, 2014, experts say that if the bill is cleared by the parliament and is implemented in the next fiscal, it could push the GDP growth to over 8 per cent next year.

If the GDP growth showed promise, the fiscal deficit in the first seven months of the current fiscal reached Rs 4.11 lakh crore, or 74 per cent, of the Budget estimate for the whole year and was better than that in the previous year. In the corresponding period last year, the deficit stood at 89.6 per cent of the Budget estimate of 2014-15.

The fiscal deficit — gap between government’s expenditure and revenue — for 2015-16 has been pegged at Rs 5.55 lakh crore.

Source: The Indian Express