GDP likely to grow by 6.5% this fiscal

Ivan Schwartz
January 8, 2018

The economy grew by 5.7 percent in the first quarter and by 6.3 percent in the second quarter of the fiscal. The farm sector is set to grow at 2.1 percent against 4.9 percent last year while mining and quarrying will grow at 2.9 percent compared to 1.8 percent last year. Measuring GDP is complicated (which is why we leave it to the economists), but at its most basic, the calculation can be done in one of two ways: either by adding up what everyone earned in a year (income approach), or by adding up what everyone spent (expenditure method).

The estimates will be a key input for the preparation of the Union Budget 2018-19 that will be tabled in Parliament on February 1. This may make it hard for the government to achieve the fiscal deficit target of 3.2% of GDP in a fiscally tight year.

Breaking a five-quarter slump, a rise in manufacturing sector output, however, pushed the growth rate higher to 6.3 per cent during the second quarter (July-September) of 2017-18.

India's economic growth in 2017-18 is estimated to drop to a four-year low of 6.5 per cent against the 7.1 per cent in 2016-17.

According to Department of Agriculture and Cooperation's data, the production of food grains during the Kharif season of agriculture year 2017-18 was 134.67 million tonnes as compared to 138.52 million tonnes during the same period in 2016-17.

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CSO data showed that in the first half (April-September) of the financial year, the economy grew at 6 per cent, indicating that it will accelerate in the second half (October-March).

Private consumption: While growth in private consumption is expected to slow to 6.3% in FY18, investment demand growth is estimated to quicken to 4.5% during the same year.

The data disclosed that sectors like public administration, defence and other services, trade, hotels, transport, communication and services related to broadcasting, electricity, gas, water supply and other utility services and financial, real estate and professional services registered a growth rate of over 7 per cent. However, revision of GST rates on as many as 178 products in November led to a fall in government revenue.

Ahead of the GDP advance estimate numbers, India benchmark equity indices closed at record closing highs, posting their fifth consecutive weekly gain, as financials and metal stocks rose tracking global markets on strong economic data.

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