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Q2 growth at 7.4%, with manufacturing boost

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Govt capital expenditure pushes investments, domestic demand a concern
India’s gross domestic product ( GDP) for the three- month period ended September 30 grew 7.4 per cent— a tad higher than the seven per cent in the previous quarter — with a boost from manufacturing and financial services.
The growth of the manufacturing sector —more than nine per cent — pleased the finance minister, Arun Jaitley. He said despite adverse global conditions, factory production had increased.
The statistics and programme implementationministryreleasedthefiguresonMonday.
There was a slight increase in investments because of the government’s capital expenditure, butthedomesticdemandcontinuedtobe aconcern. The growth was, however, much slower than the 8.4 per cent in the corresponding quarter of the previous financial year.
Economists had projected that GDP would growby7.3- 7.6percentthisquarter( seechart).
The gross value added ( GVA), comprising agriculture, industry and services, increased to 7.4 per cent in the September quarter, against 7.1 per cent in the June quarter.
According to the new methodology, the GDP is calculated as the GVA plus indirect taxes, excluding subsidies. However, over 35 percent growth in indirect tax collection was not factored in, as additional measures such as the hike in excise duty on oil, service tax rate and thew it hdrawal of exciseduty sops to the auto industry were not taken in to account while calculating economic growth.
FortheJuly- Septemberperiod, themanufacturingsectorgrew9.3percent, arecordsince the new seriesofGDP wasintroducedin201112, compared to 7.2 per cent in the previous quarter. Grossfixedcapitalformation, aproxy for investment, showed an uptick by expanding6.8percentinthesecondquarteragainst4.8 per cent in the previous three months.
However, muchofthishascomeonthebackof increased government capital expenditure.
YES Bank chief economist Shubhada Rao said, “ Gross fixed capital formation... is expected to have been driven by government capex.” Jaitley, however, said there is also private sector investment which has now started picking up. “ And I do hope in the months to come, it picks up faster.”
Business Standard, New Delhi, 1st Dec.2015

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