Bikky Khosla | 05 Nov, 2016
First, the good news. India's Growth Domestic Product
(GDP) grew 6.3 percent during the second quarter of 2017-18,
from 5.7 percent reported during the first quarter. Data released by the Central
Statistics Office (CSO) shows the GDP for Q2 standing at Rs 31.66 lakh crore. Enthusiastic
about the pace of growth, Finance Minister Arun Jaitley has viewed that the latest
GDP data indicates that perhaps the impact of demonetisation and GST is
now behind us. No doubt the data is encouraging, but according to some experts concerns
One of the most significant aspects of the latest GDP
data set is that it is impacted significantly by growth in manufacturing. The
sector grew 7 percent during the period, from 1.2 percent in the first quarter.
The pace was slower than the 7.7 percent witnessed in the second quarter of
2016-2017, but still the improvement deserves mention. Some other sectors,
including electricity, gas, water supply and other utility services, and trade,
hotels, transport also registered healthy growth.
It is definitely good to see that the negative impact of
demonetisation and GST implementation is gradually calming down. Additionally,
the sharp rise in gross fixed capital formation growth, from 1.6 percent in the
first quarter to 4.7 in the second quarter, is encouraging. This shows a
revival in investment levels. However, the latest figures bring no good news
for the services sector. Growth slowed
in sectors like finance, transport, and hotels. Also, the 1.7 percent growth in
agriculture shows that the sector is not getting proper attention.
Some experts, in fact, have viewed that the GDP growth
rate itself is not that encouraging. According to a former chief economist at
World Bank, the growth should have been back at over 9 percent, in the
background of low oil prices. Again, global rating agency Fitch has termed this
rebound as weaker than expected and reduced its growth forecast for the Indian
economy for the fiscal year to end- March 2018 to 6.7 percent from 6.9 percent.
These concerns are not ungrounded.
I invite your opinions.