• HDFC
• 10 Sep 2018
• Knowledge Centre

HDFC, Tester

India’s gross domestic product (GDP) for the first quarter of the current fiscal FY19 was up 8.2%. The Indian economy witnessed healthy growth largely on the back of a strong performance by the manufacturing and construction sectors, as well as a favorable base.

 

Encouraging factor

 

The GDP figure for the June 2018 quarter implies that India retains the tag of being the fastest-growing economy in the world.

 

According to a statement by the Ministry of Statistics and Programme Implementation, “GDP at constant (2011-12) prices in Q1 of 2018-19 is estimated to be Rs 33.74 lakh crore, as compared to Rs 31.18 lakh crore in Q1 of 2017-18. This shows a growth rate of 8.2%. Quarterly GVA at the basic price at constant (2011-2012) prices for Q1 of 2018-19 is estimated to be Rs 31.63 lakh crore, as against Rs 29.29 lakh crore in Q1 of 2017-18, showing a growth rate of 8% over the corresponding quarter of previous year.”

 

A report in a publication states that even with the updated base year, experts estimated that GDP growth will remain in the range of 7.5-7.6% during 1Q FY19. The Government had shifted the base year for GDP calculation from 2004-05 to 2011-12 by updating the goods and services in the basket in 2015.

 

Looking back

 

The GDP growth rate of 8.2% in the June 2018 quarter is also the highest in the last eight quarters. The previous best was 9.2% in the July-September 2018 quarter in 2016. It had slowed down to 5.6% in the April-June quarter in 2017, before picking up the pace and touching 7.7% in the July-September quarter in 2017, according to the publication.

 

Demonetization and GST led to a slowdown in the country’s economy. In addition, rising oil prices have resulted in a substantial depreciation of the Indian Rupee, and the country’s current account deficit has also widened. In this context, the GDP figure comes as a breather for the Government, ahead of the elections. This figure is also likely to be pivotal in RBI’s monetary policy meeting scheduled from 3rd October 2018 to 5th October 2018.

 

However, a vital parameter is that the country’s growth should be sustained, going forward.

 

“Sustaining GDP growth at over 8% in the next few years would require significant traction in private investment and relentless implementation of reforms to raise productivity. An encouraging development is a slow but steady rise in private consumption spending growth. From 6.7% in Q4 FY18, it rose to 8.6% in Q1 FY19 -- the highest in six quarters. For private investments to pick up, a strong and sustained revival in household spending is critical,” says Mr. D K Joshi, Chief Economist,CRISIL, in a report.