Manufacturing recovers to post 13.5% growth
NEW DELHI, AUGUST 31
Beating all expectations, the Indian economy recorded a growth of 8.2 per cent during first three months (April-June) of the current fiscal, the best performance in over two years.
“I am reasonably confident that we may exceed 7.5 per cent growth as projected earlier,” Economic Affairs Secretary in the Finance Ministry Subhash Chandra Garg said, adding that the consumption story is robust, manufacturing is on track and investment is picking up.
With this, India has become the world’s fastest-growing economy, leaving China (6.7 per cent) much behind. Also, the government can now claim that demonetisation is now showing a positive outcome after the 5.6 per cent growth recorded during the first quarter of the last fiscal.
Rise in spending
Better rainfall this year, and government spending have given households more money to buy consumer durables, which helped the manufacturing sector post 13.5 per cent growth in the June quarter, in sharp contrast to the 1.8 per cent contraction recorded a year ago. The farm sector recorded 5.3 per cent growth, against 3 per cent growth during the corresponding quarter of the last fiscal.
Finance Secretary Hasmukh Adhia said the 8.2 per cent growth rate indicates that several structural reforms introduced, such as the Goods and Services Tax (GST), have started yielding dividends. The growth in the manufacturing sector also indicates broad-based recovery of demand, he tweeted.
B Prasanna, Group Executive at ICICI Bank, said that the performance of industry and agriculture probably points to some employment generation in labour-intensive sectors.
“However, we are disappointed with the muted growth seen in services components. This is largely due to lacklustre performance of the trade segment, which is probably still adjusting to the GST transition,” he said.
Dharmakirti Joshi, Chief Economist at Crisil Research, expects 7.5 per cent growth to be supported by the third year of normal monsoon and reductions in GST-related problems.