Dear Mem ber,
Reversing a five-quarter slide in GDP growth, Indian economy bounced back from a three-year low to expand by 6.3 per cent in July-September as manufacturing revived up. It also indicates dissipating impact of demonetization, and gradual stabilization of the Goods and Services Tax (GST) regime. The GDP growth in the second quarter of 2017-18 compares to 5.7 per cent in April-June, the lowest growth rate since the Narendra Modi government took office, and 7.5 per cent in the September quarter of the previous fiscal.
We expect the pace to quicken in the ongoing second half, which would crank up India's GDP growth for this financial year to 6.8 per cent. The consumer continues to be the primary driver of the economy, given that private consumption rose 6.5 per cent in the second quarter, compared with 4 per cent growth in investment. Despite the efforts of the government to prop up public investments and improvement in India's' ease of doing business' rankings, the overall investment cycle remains depressed. A few segments where investment activity is likely to stay relatively healthy include roads; renewables power T&D (Transmission and Distribution), urban infrastructure, and affordable housing over the next couple of quarters. The government's bank recapitalization move would at least improve banks' ability to lend.
While a pick-up in manufacturing is welcome from an employment perspective, overall growth continues to be driven by sectors with lesser ability to absorb labour. In the context, anemic growth in sectors such as construction (with high potential to create jobs) is worrisome. The growth outlook for the remaining part of the year is not without risks, though. If GST implementation glitches take time to resolve, production and, particularly exports, can take a beating. Exports have grown slower than imports in Q2. This acts as a drag on GDP. Exports of goods and services have grown 1.2 per cent in the first half compared with import growth of 7.5 per cent.
Declining growth (1.7%) in agriculture and allied industries puts into question the hope of the agriculture sector seeing four-plus per cent growth in 2017-18. It's also a reversal of the trend from the first quarter, when agricultural Gross Domestic Product (GDP) at constant prices was higher than that in current prices, pointing to adverse terms of trade.
ASSOCHAM has been advocating for Hydro power for long and have been continuously interacting with government for revival of this sector. We recently organized a round table discussion with Sri.R.K.Singh, Hon'ble Minister of State (1/ C), Ministry of Power, New & Renewable energy, Government of India and he assured that a Hydro Policy would be in place soon. He also assured that all the recommendations from the industry would be deliberated and would be taken care while finalizing the policy.
ASSOCHAM has represented the Pre-budget meeting called by Ministry of Finance and submitted their recommendation to the Ministry for their consideration in Union Budget 2018. We thank you all the members to share their inputs for upcoming budget for FY 2017-18.
Now, that the New Year is round the corner, I wish all our members and stakeholders a HAPPY NEW YEAR 2018.