Spencer growth: GDP grew by 8.2%, the best in more than two years

By: ENS Economic Bureau New Delhi

Updated: September 1, 2018 5:57:23 pm

Spencer growth: GDP grew by 8.2%, the best in more than two years The high growth rate is supported by a low base effect – 5.6 percent in April-June 2017. (Image: CR Sasikumar / File)

The Indian economy grew fastest in nine quarters and grew by 8.2 percent in the first (April-June) quarter of the fiscal year at the end of March 2019, thanks to robust consumer spending and strong growth in the manufacturing and construction sector, according to data Friday released by the Central Bureau of Statistics.

The high growth is supported by a low base effect – 5.6 percent in April-June 2017.

The economic growth of the first quarter in India is considerably higher than 6.7 percent posted by China in the same period, but then the Chinese economy is about four times higher in India.

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In terms of gross value added (GVA), the economy grew by 8 percent in April-June this year compared to 5.6 percent in April-June 2017. GVA represents total production and total income in the economy. According to the new methodology followed by CSO, GDP is calculated by adding product VAT to the gross value added at basic prices and eliminating subsidies.

Production growth increased significantly by 13.5 percent during the period due to higher government spending, allowing households to spend more money. The processing sector witnessed a contraction of 1.8 percent in the first quarter of last year. Private consumption expenditure increased by 8.6 percent in Q1 FY19 compared to 6.9 percent in Q1 FY18.

For the full year, the government expects the economy to grow about 7.5 percent. The RBI has forecast a GDP growth of 7.4 percent for 2018-19. External headwinds, including high oil prices that entail the risks of imported inflation, and increased trade protectionism may affect exports.

"India's GDP for the first quarter of this year is growing at 8.2%, because otherwise an environment of global unrest will represent the potential of New India." Reforms and fiscal prudence serve us. "India is witnessing an expansion of the neo-middle class, "said Finance Minister Arun Jaitley in a tweet.

Growth in the construction sector rose by 8.7 percent in Q1 FY19, from 1.8 percent in Q1 FY18. The agricultural, forestry and fisheries sector recorded 5.3 percent growth, an increase of 3.0 percent, mainly due to an increase of more than 15 percent in rice, cereal and legume production during the rabi- reason.

While the growth of industry, construction and agriculture accelerated, the growth of the services sector declined substantially during the quarter. The growth of the mining sector dropped significantly to 0.1 percent in Q1 FY 19, as opposed to 1.7 percent in Q1 FY 18.

Analysts said that since the first quarter growth was helped by low base year growth in the first quarter, full growth is estimated at around 7.5 percent.

Department of Economic Affairs, secretary Subhash Chandra Garg, said that the V-shaped recovery of growth in the Indian economy is now complete. "The Indian economy must be robust and stable all year round and remain the fastest economy in the world. Robust GDP performance in the first quarter casts hopes of exceeding 7.5 percent for current fiscal policies," he said.

Former Minister of Finance, P. Chidambaram, said he is pleased that the growth rate has accelerated, but that he is based on the lowest growth of the base year with 5.6 percent in the past eight quarters. "For the future, the basic effect will not be so favorable, and when we reach Q3 and Q4, the growth rate may fall and annual growth may be about the same as last year's," he said in a tweet.

Bibek Debroy, Chairman of the Prime Minister's Economic Advisory Board (EAC-PM), said the growth figures point to "superior acceleration in the growth trajectory of India" and confirm that the economic fundamentals remain robust.

"The encouraging growth figures in agriculture, industry and construction show that growth momentum remains broad, and it is also expected that favorable monsoons will further boost agricultural output and rural consumption in the coming quarters," Debroy said.

Crisil expects the economy to grow by 7.5 percent in 2018-1919. If GDP growth is maintained at more than 8% over the coming years, significant traction would be required in private investment and relentless implementation of reforms to increase productivity, Joshi said.

Said CARE Ratings Chief Economist Madan Sabnavis: "The positive feature was a broadly supported pattern of growth, with the exception of mining, which is a surprise given the strong performance of the coal sector as shown by the sector's core data. And finance, real estate etc. Have lower growth rates registered compared to last year, where the base effect has worked in reverse, "he said.

Given the challenges of higher interest rates, weak rupees and oil price worries, Care Ratings expects some moderate growth in the coming quarters and has linked the growth of the full year to 7.5 percent, Sabnavis said.

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