NEW DELHI: By posting 7.5 per cent GDP growth for the January-March 2015 period, India has emerged as the world’s fastest growing economy, pipping China’s 7.4 per cent.
The Central Statistical Organisation (CSO) on Friday said the economy grew at a rate of 7.5 per cent in the last quarter of the financial year (2014-15). However, the gross domestic product (GDP) growth for the entire FY15 now provisionally stands at 7.3 per cent.
Commenting on the new GDP data, Finance Minister Arun Jaitley said the fourth quarter GDP growth of 7.5 per cent and 7.3 per cent for the entire financial year 2014-15 indicate that the economy is in “recovery mode”.
Dismissing former Prime Minister Manmohan Singh’s comments on the state of Indian economy, Jaitley said an economy growing at fastest pace in the world cannot be ‘fragile’.
Earlier, the former Prime Minister said that recovery in the Indian economy was very fragile.
“In a global slowdown situation, to have the fastest growth rate in the world certainly does not make Indian economy fragile,” he told reporters here.
Several economists, including the government’s chief economic advisor Arvind Subramanian, however, have warned against rushing in to use the new GDP numbers to draft policy, as the CSO has started measuring GDP by including indirect taxes.
According to the latest numbers, India is growing at a faster pace than China, due to the new methodology of calculating GDP. The Chinese economy grew by 7 per cent in the March quarter.
D K Joshi, chief economist at CRISIL said, “It will take us some time to understand these numbers. These numbers should not influence the central bank. But we expect RBI to cut interest rates by 25 bps.”
The Gross Value Added (GVA), a new concept introduced by CSO to measure the economic activity, rose by 7.2 per cent in 2014-15 compared 6.6 per cent in the previous fiscal.
Most of the growth is witnessed from the boost it gets from the manufacturing and services sectors. The manufacturing GVA, which registered 8.4 per cent growth in the fourth quarter, rose by 7.1 per cent during the year as against 5.3 per cent in 2013-14. Similarly, the output of electricity, gas, water supply and other utility services rose by 7.9 per cent as against 4.8 per cent a year ago. The construction activity too registered an increase of 4.8 per cent, up from 2.5 per cent a year ago.
However, agriculture and mining and quarrying sectors remained laggards in the January-March quarter. The data showed that farm output during the quarter declined by 1.4 per cent as compared to a growth of 4.4 per cent in the corresponding quarter of the previous fiscal. In 2014-15, farm sector has shown a meagre growth rate of 0.2 per cent, as against the growth rate of 1.1 per cent in the advance estimate, the CSO report said.
Analysts say domestic economy continues to be sluggish despite robust headline growth. Industrial activity is weak, corporate earnings are under pressure and bank credit recovery remains elusive.
Debopam Chaudhuri, chief economist and vice-president (Research) at ZyFin Research said, “With 57 per cent of the GDP composed of private expenditure, a recovering PFCE (Private Final Consumption Expenditure) is vital for its future growth. With recovering consumer confidence, we can expect PFCE to improve further lending support to the India growth story.”
However, despite efforts made by the government to improve mining activities through auctioning process and clearing leases, the output of mining and quarrying sector too slipped to 2.4 per cent from 5.4 per cent a year ago.
While a sharp fall in global crude prices and inflation showing falling trends, experts hope that this will help the government narrow its fiscal and current account deficits.
Commenting on the growth numbers, India Inc said the economy is showing signs of recovery but called for serious attempts to revive growth in agriculture sector.
“Agriculture output may be impacted with a sub-normal monsoon forecast this year, weak demand remains a persisting concern and a firm turnaround in the domestic capex cycle is awaited,” FICCI said in a statement.’
Industry body CII said, “We expect further improvement of the key levers of the economy, going forward, as the government steps up public investment, which in the process crowds in private investment to rekindle a new demand cycle in the economy.”