ECONOMY REBOUNDS

GDP GROWTH RATE RISES, TO 6.3%, AFTER 5 QUARTERS MANUFACTURING RECOVERS; AGRI, SERVICES GROWTH DOWN

The country’s economic growth recovered to more than 6 per cent in the July-September quarter, backed by strong manufacturing, allaying doubts about disruptions caused by the goods and services tax (GST).

This was a break with five quarters of declining trends in growth, but India remained behind China in economic expansion.

It was destocking in the first quarter of 2017-18 due to pre-GST jitters that had pulled down gross domestic product (GDP) growth to a more than three-year low. GDP rose 6.3 per cent in the quarter ended September, higher than the 5.7 per cent in the previous one on improved investment and steady demand, the data from the Central Statistics Office showed on Thursday.

The growth was the highest in three quarters, but lower than the 6.9 per cent recorded in the third quarter of 2016-17, when demonetisation was announced.

Gross value added (GVA), which is summation of agriculture, industry and services, also grew to a threequarter high of 6.1 per cent compared to 5.6 per cent in the previous two quarters.

This prompted Finance Minister Arun Jaitley to say that the impact of demonetisation and the GST were behind us. “Hopefully, growth in coming quarters will be on an upward trajectory,” he told reporters after the GDP data was released.

He said deceleration trends in overall growth witnessed since Q1 of the last fiscal year had been reversed. “The economy now seems to have weathered the transitional challenges experienced earlier in the year and appears poised for a durable recovery, going forward,” the finance minister said.

While investment grew 4.6 per cent in Q2 compared to 1.6 per cent in the first quarter on a year-on-year basis, its share in GDP fell to 27.5 per cent from 29.9 per cent in Q1, indicating that GST-related stress in the economy had not dissipated.

The GST was introduced on July 1 across the country.

While manufacturing grew 7 per cent in the second quarter against 1.2 per cent in the first, services sector growth showed a significant decline to 7.1 per cent from 8.7 in the previous quarter on account of the muted performance of the financial, insurance and real estate sectors.

None of the segments grew in double digits though trade, hotel, transport, etc services rose 9.9 per cent, albeit lower than 11.1 per cent in the previous quarter.

Manufacturing bounced back despite a high base effect of 7.7 per cent in Q2 of the previous year.

“It doesn't appear that inventory accumulation has led to GDP increase in Q2. But it will remain in Q3 as firms increase production in anticipation of more sales during the festive season ," chief statistician T CA Anant told journalists. Agricultural growth fell to 1.7 per cent in Q2 from 2.3 per cent in the previous quarter because of a sharp decline in the production of foodgrains during the kharif season.