With growth at 7.2 per cent in October-December 2017 quarter the Indian economy moved ahead of China which grew 6.8 per cent in October-December 2017 as the fastest growing large economy. The spurt was fuelled largely by improvements in the manufacturing and services sectors. This is the most brisk pace of growth recorded in the last five quarters, according to government data released on Wednesday.
The latest development has brought cheer to the government as GDP growth had sunk to a three- year low of 5.7 per cent in April-June quarter 2017-18 in wake of note ban and GST launch on July 1. In the second quarter or the July-September 2017-18, the economic growth had picked up to a revised 6.5 per cent annually.
Latest official estimates also have been reworked at 6.6 percent in 2017-18 compared to earlier assessment of 6.5 per cent. The sign of revival indicates that negative impact of the twin torpedoes – demonetisation and GST are now things of the past.
T C Ananth, the CSO said, real GDP at constant (2011-12) prices in 2017-18 is likely to be Rs 130.04 lakh crore, against the first revised estimate for 2016-17 of Rs 121.96 lakh crore which was released on January 31.
The good news is in line with the governments earlier estimation. In the start of the fresh calendar year the finance ministry had projected that GDP for the third quarter would grow at 7 per cent and for 2017-18 at 6.5 per cent.
The latest figures are also in sync with recent World Bank assessment that the Indian economy in 2018-19 will grow at 7.3 per cent and 7.5 per cent in the next two years. The revival is also good news for the NDA-led government which is heading towards the second half of the budget session. The development ahead of the Karnataka Assembly polls is likely to brighten the prospects of BJP in the southern state.
The fresh estimates mirror the trends witnessed in indicators like industrial output and corporate income.
The government still remains cautious on the farm sector front as agriculture sector grew at 4.1 per cent in October-December compared to 2.7 per cent in the previous quarter. Incidentally, it is way below the last year figure for the same quarter. The estimation is that it may grow at 3 per cent in 2017-18 as farm sector growth remains subdued due to unfavorable projections of kharif output of crops like oilseeds, pulses, cereals and cotton.
If GST launch in July last year saw manufacturing taking a major hit as most companies were busy clearing stocks, the sector in this quarter grew at 8.1 per cent compared to 6.9 per cent in the previous quarter. The government says that manufacturing from now on will expand in the fiscal at 5.1 per cent and come closer to the 7.9 per cent. The trend indicates that the GST teething troubles are slowly being eased.
Also, there has been a positive upturn in urban consumption. The government feels that the signs of recovery in non-agricultural growth inform of greater investments and the health service sector, public administration and few other indicators do augur well for the economy.
There has been a significant rise in spending of the central government in the third quarter.
Along with this, improved spending of state governments have contributed to 12 per cent rise in gross fixed capital expansion in October December of 2017-18.
The news from the construction sector too is encouraging for the government as it grew at 6.8 per cent compared to 2.8 per cent in the second quarter.