India’s economy grew at 7.1 percent in July-September, lowest in three quarters, but still remained ahead of China to retain the tag of the world’s fastest growing major economy. The Gross Domestic Product (GDP) at constant prices (2011-12) had grown at 6.3 percent in July-September quarter of the last fiscal, according to government data released on Friday.
The size of the GDP in the second quarter of 2018-19 is estimated at Rs 33.98 lakh crore, as against Rs 31.72 lakh crore a year ago, showing a growth rate of 7.1 percent, as per a statement of the Central Statistics Office (CSO). Indian economy grew at 8.2 percent in April-June quarter of this fiscal. The GDP growth was 7.7 perper cent in January-March quarter while it was at 7 percent in October-December. The Chinese economy had expanded at the rate of 6.5 percent in the July-September period this year.
CNBC-TV18 caught up with Sudipto Mundle, chairman of real sector statistics panel and board member of NIPFP; Soumya Kanti Ghosh, group chief economic advisor of SBI, Pronab Sen, former principle adviser at planning commission and Ashima Goyal, member of PMEAC, to understand whether the full year GDP will barely make it to 7 percent or will the government give up on fiscal discipline.
Ghosh said, “I think if you strip out the base effect, the growth rate in second quarter is actually dipped below 7 percent. If you look into core gross value added (GVA), which excludes the agricultural part and the public part, it has expanded at 6.6 percent. So that is a number which has slowed down significantly from 8.6 percent last quarter. I think that is the lowest since Q2 of FY18.”
“If you actually break down the economy into two parts, the GVA into two parts, the nominal agricultural GVA and the nominal non-agricultural GVA, you will find two very contrasting trends. The nominal non-agricultural GVA has grown at 13.4 percent, it has slowed down a little bit, but the nominal agricultural GVA growth rate is actually at 2.8 percent and that is lower than the real agricultural GVA at 3.8 percent. So that indicates that there is an element of rural distress,” Ghosh added.
Sen said, “I think the pain is not going to pass that quickly. The low agricultural GVA growth is an indicator not just of what is happening in agriculture, but what is happening to agricultural income. Since 50 percent of our population is in that category, what it suggests is that the demand side of the economy is not going to be performing well anytime soon. That is a worrying part.”
Mundle said there is a gloom on the rural agricultural side, which accounts relatively small share of the GDP, “If you look at sectors of value addition, I think the good thing is that growth has come from manufacturing, construction, utilities and so on. Of course agriculture continues to grow as always at relatively modest rate. On the services side, we are seeing growth in the public services and expenditure.”
Goyal said, “Manufacturing is growing quite respectably on a higher base this time and it means that there is some sort of sustained recovery there. Since the government is tied with the fiscal deficit and expenditure has been front loaded, it’s likely to go slow in the second half of the year. The real interest rate is already above 3 percent and they have to be very careful in changing to a neutral stance quickly.”