India’s Gross Domestic Product (GDP) grew at below expected levels of 7.1% versus 7.9% in the last quarter of FY16. This is even lower than 7.5% growth registered in the first quarter of last financial year. According to the Ministry of Statistics & Programme Implementation release, the growth in private final consumption expenditure at current prices is estimated at 11.7% in Q1 of the current financial year. The gross fixed capital formation declined by 1.1% as compared to an increase by 6.8% in Q1 last year. The growth in IIP capital goods was (-)18.0% in April-June 2016-17 as against growth of 2.0% during April-June 2015-16.
The GDP at constant (2011-12) prices in Q1 is estimated at Rs 29.17 lakh crore, as against Rs 27.24 lakh crore in Q1 of last fiscal. The growth in the ‘agriculture, forestry and fishing’ and ‘construction’ is estimated to be 1.8% and 1.5% respectively. The industrial sector grew at 6% versus 6.7% YoY and the services sector registered a growth of 9.6% versus 8.8% YoY. The manufacturing sector registered a robust growth of 9.1% versus 7.3% YoY, but the mining sector suffered a major setback with contraction of (-)0.4% versus a growth of 8.5% YoY. The farm sector grew at 1.8% versus 2.6% YoY and the construction sector growth also came in at a meagre 1.5% versus 5.6% YoY.
Analysts believe that India needs grow consistently at over 8 per cent if it is to generate the millions of jobs that Prime Minister Narendra Modi promised when he came to power. Most economists are betting on a consumption-led growth revival.
Entering the tail-end of the monsoon season, which runs from June through September, rains have been far kinder this year. Normal rainfall this summer can lift rural consumption by $80 billion in the year to end-March 2017, according to Citibank’s estimates. A hefty hike in wages for nearly 10 million federal government employees and pensioners will also fuel spending, countering some of the caution that has spread among urban consumers due to low wage growth.
(With inputs from Reuters)