India Economy

India’s GDP springs forward

Compiled by CRISIL Economy Research | Updated on September 07, 2018


India’s Gross Domestic Product grew 8.2 per cent on-year in the first quarter of fiscal 2019 (April-June 2018), compared with 5.6 per cent in the same period last year. This was driven by 13.5 per cent surge in manufacturing growth, 8.7 per cent growth in construction and over 5 per cent growth in agriculture. However, the service sector has not shown very encouraging signs; private consumption showed a robust growth of 8.6 per cent, the highest in six quarters, while investment growth was also solid, backed by government spending on infrastructure-related sectors.

Fiscal deficit does well so far


Fiscal deficit clocked 86.5 per cent of the full year’s Budget estimate in the first four months of FY18-19. This is lower than the 92.4 per cent for the same period in FY17-18. The improvement was driven by lower revenue expenditure (as a percentage of target) in this fiscal compared with the previous fiscal. Capital expenditure has been relatively higher as a proportion of the full-year target, indicating an improvement in quality of expenditure. However, tax collections at 19.8 per cent of the target were slightly lower than the 21 per cent of last year.

G-Sec yields harden in August


Yields on 10-year Government Security (G-Sec) rose in August, ending at 7.95 per cent, higher than 7.77 per cent in July-end. The hike in repo rate in August by another 25 basis points was an immediate trigger. Tighter liquidity in the banking system further contributed to the rise. Yields have been on a rising trend in fiscal 2019 so far, given the high supply of government bonds and weak demand from banks and other institutional investors. However, inflows from foreign institutional investors increased to $506 million (net) in August, from $6 million in July.

Rupee breaches 70 per US dollar



The rupee closed August at an all-time low of 70.9/$, falling 3.4 per cent on-month. On an average, the rupee stood at 69.5/$ in August, depreciating 1.2 per cent on-month. In calendar year 2018 so far, the rupee has lost 9.2 per cent on an average. Rising trade deficit is weighing on the rupee. On the supply side, the crisis in Turkey and the on-going tariff war between the US and China kept inflows from foreign institutional investors tepid. A rapidly strengthening dollar and higher crude-oil prices are bad for the rupee, since India is a net importer of oil.

Deficient rainfall in five States



The all-India cumulative rainfall was 6 per cent below the long-period average (LPA) as of August-end. However, distribution this year has been somewhat patchy. While Kerala is recovering from floods, key kharif-growing States such as Bihar, Haryana, Gujarat, Punjab and West Bengal are 14-25 per cent deficient, ranging -14 per cent to -25 per cent of LPA. Of these, the worst-affected are Gujarat and West Bengal. As a result, the sowing of oilseeds and coarse cereals crops, which are predominantly produced in these rainfall-deficient States, has so far been relatively weak.

Published on September 02, 2018

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