India’s quarterly GDP growth slows to 7.1%
By UK India Business Council (UKIBC)
IN THIS YEAR’S APRIL - JUNE QUARTER, INDIA’S GDP GROWTH SLOWED SLIGHTLY TO AROUND 7.1 PER CENT FROM 7.9 PER CENT IN THE JANUARY - MARCH QUARTER
India's mining industry has experienced stalling growth. Image credit: Oxfam Australia
The slight reduction in GDP growth is partly attributed to weaker activity in the agriculture, mining and construction sectors, which produced figures of 1.8, – 0.4, and 1.5 per cent respectively, according to the figures released by the Government of India. Agricultural sector growth fell to 1.8 per cent from 2.6 per cent a year earlier.
However, the manufacturing sector experienced accelerated growth to 9.1 per cent, from 7.3 per cent a year earlier. There was also positive news in the electricity, gas, water supply and other utility services sector, which grew by 9.4 per cent as compared to growth of 4.0 per cent last year. The service sector remains a critical driver of the economy, with growth in the financial, insurance, real estate and professional services rising to 9.4 per cent.
The growth in manufacturing will be particularly pleasing for Mr Modi and the Government – signalling that the ‘Make in India’ campaign is generating results. Although the slower expansion of agriculture could be of concern, the encouraging news on the horizon – for India and particularly the rural sector – is that there has been a normal, or good, monsoon this year. This will lead to stronger growth. As will the policies announced in Arun Jaitley’s budget earlier this year to double rural incomes by 2020.
The incoming Governor of the Reserve Bank of India, Urjit Patel, will need to examine these growth figures and judge what it means for interest rates. To create jobs for the million people joining the workforce every year, India needs to grow at close to 10 percent. To achieve this, private sector investment needs to be higher, and business leaders want lower interest rates to enable them to make such investment. But with a keen eye on inflation, Mr Patel has a fine balance to strike – job creation, or low prices.
It has to be said that this slight reduction in growth is not entirely surprising. It is common across emerging markets and, according to an NDTV article, several business forecasts had pointed to slowing foreign and domestic demand for Indian goods and services.
Despite this, India still remains the fastest growing major economy in the world and is on track to be the third largest economy in the world in 2030.
