First test for govt: Q2 GDP growth estimated to dip

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New Delhi | Published: November 26, 2014 8:09:01 AM

The Indian economy is estimated to have grown at 5 per cent or even lower in the second quarter...

The economy grew by 4.8 per cent in the second quarter of the last fiscal. ReutersThe economy grew by 4.8 per cent in the second quarter of the last fiscal. Reuters

The Indian economy is estimated to have grown at 5 per cent or even lower in the second quarter of 2014-15, sharply lower than the 5.7 per cent witnessed in the first quarter.

Official data on gross domestic product (GDP) growth between July and September 2014, which will be released on Friday, is expected to be a key input for the Reserve Bank of India’s policy review on December 2. Until now the central bank has maintained a hawkish stance and has refused to lower key rates. But finance minister Arun Jaitley, too, has pitched for a cut in key rates to encourage investments.

The GDP data, which is the first such growth estimate during the NDA government’s term is expected to have been dragged down by poor performance of farm and manufacturing sectors.

“The final numbers are still being computed but industrial growth has been disappointing while a base effect in agriculture could pull down growth in the sector. GDP growth is likely to be 5 per cent or lesser,” said a source privy to the development.

The economy grew by 4.8 per cent in the second quarter of the last fiscal with agriculture posting a growth of 4.6 per cent and manufacturing had risen by 1 per cent.

“This year, the second quarter growth will not be as good as the first quarter but the economy could improve in the third and fourth quarter,” said the source. Industrial performance has been largely subdued despite a slew of measures announced by the government to boost manufacturing. The index of industrial production grew 2.5 per cent in September but was muted at 0.5 per cent in August and 0.4 per cent in July.

Meanwhile, poor rains are expected to impact farm sector growth and construction activity remains generally low during the rains. “It will not be surprising if economic expansion in the second quarter is 5 per cent or sub-5 per cent,” said DK Pant, chief economist, India Ratings. “Farm sector growth is likely to be about 0.8 per cent while manufacturing could be about 1.5 per cent.”

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