P Chidambaram Sceptical Over GDP Growth Prospects In Coming Year

P Chidambaram Sceptical Over GDP Growth Prospects In Coming Year

NEW DELHI-India's economy grew more than 8% last quarter as strong domestic demand sheltered Asia's third-largest economy from the effects of rising global trade tensions and concerns about emerging markets.

In terms of Gross Value Added (GVA), the economy grew at 8 per cent in April-June this year compared with 5.6 per cent in April-June 2017.

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

Manufacturing remained the best of the lot with its quarterly GVA at basic prices for the quarter growing by 13.5 percent as compared to growth of (-) 1.8 per cent in corresponding quarter previous fiscal.

GDP growth rate of 8.2 per cent in the June quarter is also the fastest in the past eight quarters. "India is witnessing an expansion of the neo middle class", Finance Minister Arun Jaitley said in a tweet.

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However, economists warned that the GDP growth in the next three quarters may not be as high because the base effect would disappear. The Reserve Bank of India, which has increased interest rates twice since June to curb inflation, expects the economy to expand 7.4% in fiscal 2019.

"Agriculture, forestry and fishing", "mining and quarrying", "trade, hotels, transport, communication and services related to broadcasting", and "financial, real estate and professional services" registered growth of 5.3 per cent, 0.1 per cent, 6.7 per cent, and 6.5 per cent respectively during this period. "Indian economy is witnessing unprecedented growth in every sector, from manufacturing to agriculture".

Analysts said since the first quarter growth was aided by low base year growth in first quarter, full growth is estimated at around 7.5 per cent. "The Indian economy should grow at robust and steady state in full year, remaining the fastest economy in the world". While this shows a continuing process of economic recovery, the presence of base effect calls for caution in declaring that India has placed itself in a trajectory of 8% plus growth, he said. "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 added. The GDP grew at a rate of 7.7 per cent in the last (January-March) quarter.

The RBI's next policy is due on Oct.5.

The ongoing Kharif crop season will largely determine whether the GDP growth rate will maintain its momentum in 2018-19. Sustaining GDP growth at over 8% over the next few years would require significant traction in private investments and relentless implementation of reforms to raise productivity, Joshi said.

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