India´s economic growth surges to 8.2pc

Moody’s Investor Service recently said the government was likely to miss its fiscal deficit target in 2018-19 due to higher than budgeted oil prices and rising interest rate scenario

Gross domestic product expanded by 8.2% in the three months to June, compared with a 5.5% rise in the same quarter past year, reinforcing India as one of the fastest growing economies.

The International Monetary Fund has forecast GDP growth for the current fiscal year at 7.3 percent, rising to 7.5 percent the following year. But, not the government, which now expected that even its projections of up to 7.5 per cent growth in FY19 may be crossed. Economists said a positive feature of the growth dynamics has been the buoyancy in employment-supporting sectors such as construction and manufacturing.

The finance ministry said despite some headwinds like higher crude oil prices, uncertainties on trade front due to protectionist tendencies in some countries, the Indian economy has performed well. India is the world's fastest-growing economy and expanding more quickly than China, which reported 6.7% economic growth in the second quarter.

Part of the spurt in growth can be traced to a low base effect as the economy was held back by the twin shocks of the GST and demonetisation in the previous year. "An encouraging development is the slow but steady rise in private consumption spending growth".

Ashima Goyal, member of Prime Minister's Economic Advisory Council PMEAC said, "8 percent gross value added (GVA), 8.2 percent gross domestic product (GDP) is really good, but we must remember that it is on a low base last quarter".

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Sector-wise growth figures for GVA show that manufacturing and construction have registered the biggest improvements.

Subhash Garg, the economic affairs secretary, told reporters the government will stick to the fiscal deficit target of 3.3 percent of GDP this fiscal year.

According to statement, the quarterly GVA (Gross Value Added) at basic price at constant (2011-2012) prices for Q1 of 2018-19 is estimated at ₹31.63 lakh crore, as against ₹29.29 lakh crore in Q1 of 2017-18, showing a growth rate of 8% over the year-ago period. "Growth in manufacturing (13.5 per cent) also indicates broad-based recovery of demand".

"The growth in the "agriculture, forestry and fishing", "mining and quarrying", "trade, hotels, transport, communication and services related to broadcasting" and financial, real estate and professional services is estimated to be 5.3 per cent, 0.1 per cent, 6.7 per cent, and 6.5 per cent respectively during this period". The favourable base effect this time around has prompted economists to caution that 8%-plus growth doesn't seem likely for the net three quarters. "And when we reach Q3 and Q4, the rate of growth may decline and the annual growth rate may be more or less like last year's", he said on Twitter.

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