GDP at 6.3% in July-Sep: Economy is not out of woods yet

Posted on Dec 1 2017 - 10:48am by Webdesk

Union finance minister Arun Jaitley called a presser to announce that the Q2 numbers indicated economy is past the impact caused by demonetisation and GST (goods and services tax) and economic growth will only improve from this quarter onwards. Is it really the end of the economic decline cycle? Are there strong reasons to celebrate the 60bps jump in growth in the second quarter?

First of all, there is no marked improvement in the growth trend to begin the celebrations, but only signs of marginal recovery from a prolonged declining trend. If one looks at year-on-year growth numbers, the GDP in the second quarter has fallen from 7.5 percent to 6.3 percent. That’s a fall of 120 bps. Before reveling on the 60 bps improvement quarter on-quarter, one should take note of this.

The answer is, primarily, mining and the manufacturing segments. Growth in the manufacturing sector improved to 7 percent from 1.2 percent in the preceding quarter but, even here, on a year-on-year basis, it has slipped from 7.7 percent. Mining registered a substantial growth to 5.5 percent from negative 0.7 percent in Q1 and negative 1.3 percent in the year-ago period.

Similarly, electricity grew by 7.6 percent as against 7 percent in preceding quarter and 5.1 percent in the year-ago quarter. Trade, hotels, transport and construction too aided, with the segment growing 9.9 percent compared with 7.7 percent in the year-ago period.


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