Modi government may have scripted world-beating Q1 GDP growth numbers, but this concern remains

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Published: September 3, 2018 1:12:30 PM

India posted 8.2 percent GDP growth in the April-June quarter of fiscal ending March 2019.

India posted 8.2 percent GDP growth in April-June quarter of fiscal ending March 2019.

Even though India clocked record Q1 GDP growth rate, rising current account deficit (CAD) remains a major concern for the economy, Neelkanth Mishra of Credit Suisse said. “The fact that we grew at 10.3 percent is not surprising. On a 2-year CAGR basis, the growth is flat. The trend growth is continuing but what worries me is that even at this growth we are running a balance of payment deficit and therefore this growth appears unsustainable and has to slow down,” Neelkanth Mishra, Managing Director and the Credit Suisse India Economist and Strategist told CNBC TV18.

Talking about rupee free fall, Neelkanth Mishra said, “As the rupee weakens and as it translates into higher prices of autos, higher prices of consumer staples, you will see demand starting to slowdown. We have started to see some signs of that.”

Strong GDP growth numbers for quarter ended June maybe a strong sign but the same can’t be be taken as a strong growth indicator, he added. India posted 8.2 percent GDP growth in April-June quarter of fiscal ending March 2019. It is the fastest the Indian economy has expanded in the nine quarters. In April-June 2017, the GDP growth was recorded at 5.6 percent. The first quarter GDP growth in India is significantly higher than 6.7 percent clocked by China during the corresponding period.

“India’s GDP for the first quarter this year growing at 8.2% in otherwise an environment of global turmoil represents the potential of New India. Reforms and fiscal prudence are serving us well. India is witnessing an expansion of the neo middle class,” Finance Minister Arun Jaitley had tweeted.

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