Bikky Khosla | 04 Sep, 2018
Gross Domestic Product (GDP) for
the first quarter of the current financial year registered a robust 8.2 percent
growth, according to official data released last week. This
better-than-expected growth rate is a pleasant surprise, particularly for the
Modi government amid the ongoing debate over its economic record versus that of
the UPA government. The Prime Minister took no time to claim that when policies
are correct, positive outcomes follow. Economists are, however, bit cautious
while reading into these growth numbers.
This economic expansion in the
first quarter is the fastest achieved since the January-March quarter of 2016.
Now, India has again cemented its status as the world's fastest growing major
economy, beating China, which has grown 6.7 percent during the same period. The
latest GDP figures also stand out as it is powered by a strong performance of
both manufacturing and consumer spending. In other words, our households are
now buying more and our manufacturers are producing more as well, as reflected
by 8.7 percent and 13.5 percent growth registered by these two segments,
respectively.
It is equally encouraging to see
healthy growth in agriculture and construction. The farm sector grew 5.3
percent, from 3 percent in the corresponding period last year, due to strong
Rabi or winter sown harvest. Showing a similar trend, the construction sector
grew 8.7 percent in April-June, from 1.8 percent in the same quarter last year,
reflecting healthy growth in infrastructure, particularly road construction.
These figures are no doubt strong enough to raise hope of a faster economic
recovery in the coming months.
But a bit of a caution here. While
the growth in private consumption, to 54.9 percent at constant prices in June
quarter, from 54.6 percent in March quarter, is really impressive, the
seemingly higher 10 percent growth in gross fixed capital formation (GFCF) is
actually lower than 14.4 percent growth achieved in March quarter. In other
words, there is a slowdown in gross capital formation or investment demand in
June quarter. So, we have to wait further for investment-led demand to pick up.
I invite your opinions.
