Economy

Manufacturing drags GDP growth to 6.9% in Q2

Our Bureau New Delhi | Updated on March 12, 2018 Published on November 30, 2011

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Poor performance of manufacturing, agriculture and mining sectors impacted gross domestic product growth in the second quarter.

Performance not all that disappointing, says Pranab

A noticeable slowdown in the manufacturing sector, decline in mining output and some delay in decision making pulled down the Indian economy's growth in the second quarter to 6.9 per cent, much lower than the 7.7 per cent growth recorded in the previous quarter this fiscal.

This second quarter GDP growth performance, which is the lowest in nine quarters, is also lower than the downward adjusted revised growth of 8.4 per cent recorded in the same quarter last fiscal. Despite this slowdown, key Indian policymakers today exuded confidence that overall GDP growth would be 7-7.5 per cent this fiscal.

“This growth performance (for Q2) is not all that disappointing. Going forward, I am confident that we will be recovering some of the loss in growth momentum,” the Finance Minister, Mr Pranab Mukherjee, told reporters soon after the CSO data were released here on Wednesday.

While the manufacturing sector grew 2.7 per cent in Q2, lower than the growth rate of 7.8 per cent in the same quarter last year, the mining output declined by 2.9 per cent (growth of 8 per cent in Q2 last year). Agriculture growth slowed to 3.2 per cent from 5.4 per cent in the same quarter last year.

Cumulative GDP growth for the first half of current fiscal has moderated to 7.3 per cent from 8.6 per cent.

“We are having multiple problems…Slow growth of Europe and America. There are problems within the country and also outside the country. We shall have to try and face this situation and to see what best we can do to face the situation,” Mr Mukherjee said.

Q4 rebound likely

Attributing the slowdown in the second quarter GDP growth performance to fall in investments, the Planning Commission Deputy Chairman, Mr Montek Singh Ahluwalia, said that he expects the economy to rebound in the fourth quarter and pegged the overall growth rate this fiscal to be 7-7.5 per cent.

Describing the 6.9 per cent GDP growth performance in second quarter as “lower than expectation”, the Prime Minister's Economic Advisory Council (PMEAC) Chairman, Dr C. Rangarajan, said that improved performance in agriculture in the third and fourth quarters should help the economy record annual growth of 7.5 per cent.

The Chief Economic Advisor to the Finance Ministry, Dr Kaushik Basu, attributed the temporary slowdown in growth to the gloomy global scenario, high inflation and some slowdown in decision making.

However, Dr Basu expects the economy to rebound in the fourth quarter and help achieve overall GDP expansion of 7.5 per cent for current fiscal.

“Third quarter will be a difficult quarter. But Q4 should see very good pick-up,” he said.

On the drop in investments, Dr Basu said that “slight slippage” in investments does not jeopardise India's long-term growth story. He, however, declined to comment on whether the current economic slowdown would make a case for some monetary easing by the Reserve Bank of India.

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Published on November 30, 2011
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