Economy

Will the second quarter GDP performance spring a surprise?

Surabhi New Delhi | Updated on January 22, 2018

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Indications are of 7.2% growth

The economy is estimated to have grown at a more robust pace in the second quarter of the fiscal, compared with the 7 per cent it clocked in the first.

Official data indicate that the gross domestic product grew at least 7.2 per cent in the quarter ended September 30, on the back of improving manufacturing performance and higher public spending. This indicates that the recent rate cuts announced by the RBI has had a positive impact.

However, given the high food prices, the RBI Governor may not cut rates further.

“The data is still being compiled, but economic growth is estimated to have been better than that clocked in the last quarter,” said a person familiar with the development. The Central Statistics Office will release data on the gross domestic product (GDP) for the second quarter of 2015-16 on November 30, a day before the RBI’s fifth bimonthly monetary policy review on December 1.

Though the Budget had pegged GDP growth at between 8 per cent and 8.5 per cent in 2015-16, the central bank in its last monetary policy review in September had cut GDP growth forecast to 7.4 per cent for the fiscal from its earlier forecast of 7.6.

Sources said farm sector growth is likely to be muted due to deficient monsoons but the impact of the rains will be felt more in the later quarters. The silver lining, however, is likely to be the manufacturing sector, which is likely to show some improvement from the first quarter when it grew at 7.2 per cent.

Another reason for the improved growth is estimated to be higher public spending, sources said. Public administration, defence and other services had grown at a mere 2.7 per cent in the previous quarter. Analysts too have factored in better economic growth in the second quarter.

“We expect the GDP to expand at 7.6 per cent in the second quarter of 2015-16, compared with 7 per cent in the first quarter of the fiscal and 8.4 per cent in the second quarter of last fiscal,” said India Ratings, while warning that growth of exports and imports may have contracted due to global factors.

Published on November 27, 2015

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