Rise in Q2 growth numbers signals economic recovery

GDP data a shot in the arm for the Modi government, which is fighting charges that the note ban and GST had disrupted the $2.4 tn economy

India Inc. on Thursday said the rise in the second quarter (Q2) GDP numbers showed signs of economic recovery. "Growth numbers are in sync with the expectations and re-affirm that signs of a recovery are in sight," said Federation of Indian Chambers of commerce and Industry (FICCI) President Pankaj Patel. "The performance of the industrial sector has noted an improvement after dropping to the lowest in almost five years in the previous quarter... It is encouraging to see the government's approach towards resolving GST related issues."

Patel said that the Reserve Bank of India’s (RBI) upcoming monetary policy review, scheduled for next week, "will be a perfect timing to give another shot to boost the sentiment". "The government should look at further consolidating its reform agenda in the forthcoming Union Budget 201819 to be announced two months from now to give a further boost to investment," Patel added, reports IANS. According to Anis Chakravarty, Lead Economist, Deloitte India, the latest set of numbers showed improved performance of manufacturing that could have possibly been affected by implementation of the GST from July 1, 2017. "High frequency indicators such as auto sales suggest that demand has recovered since then and manufacturing could see better numbers in the quarters ahead," Chakravarty said.

"A pick up in mining activity was also clearly visible and bodes well for the economy. [But] the agriculture sector seems to have underperformed given the normal rainfall and kharif output."

Official data on Thursday showed that a rise in the manufacturing sector's output pushed India's growth rate higher to 6.3 per cent during the second-quarter of 2017-18. Data from India’s Central Statistics Office's (CSO) showed that the GDP for Q2 stood at Rs 31.66 lakh crore, or a growth of 6.3 per cent. On a sequential basis, India's GDP growth for Q2 of the ongoin fiscal went up to 6.3 per cent, from the 5.7 per cent reported during the first-quarter of 2017-18.

Finance Minister Arun Jaitley tweeted: "Government's reforms to push economic growth are working, can be seen from that manufacturing has shown robust growth of 7 per cent in Q2 and services at 7.1 per cent. Gross fixed capital formation has increased from 1.6 per cent in Q1 to 4.7 per cent in Q2."

The latest GDP numbers reverse a five-quarter slide in GDP growth.

Moody's expects the world's seventh-largest economy to grow by 6.7 per cent in the 2017-18 fiscal and by 7.5 per cent in the next financial year, reports PTI. Coming close on the heels of Moody's recent upgrade of India's sovereign credit for the first time in nearly 14 years, the growth buoyancy comes as a shot in the arm for the Narendram Modi government, which has been fighting off charges that demonetisation and the roll out of the goods and services taxt (GST) disrupted the USD 2.4-trillion economy.