By Ruma Dubey
Looks like the demon of demonetization and GST is far, far behind us; at least that is what the Q3GDP numbers indicates. In fact we are doing so well that we have surpassed the growth rate of China and believe it or not, we are the fastest growing economy in the world.
India’s GDP for Q3FY18 rose 7.2% v/s 6.3% in Q2 and up from the 3-year low of 5.7% in Q1. The growth rate was led by a spirited bounce back in the manufacturing and services sector.
The Gross Value Added (GVA) which is GDP minus net taxes was at 6.7% for Q3, up from .1% in Q2. This is considered to be a more realistic indicator of the economy as it truly measures the aggregate production value of goods and services.
A look at the sectoral growth clearly shows that manufacturing was the turning point – it grew 8.1% v/s 6.9% (QoQ); farm sector growth almost doubled from 2.7% to 4.1%. Construction too did very well at 6.8% v/s 2.8%. Financial, realty and insurance sector growth was muted at 6.7% v/s 6.4%. Mining saw a degrowth of 0.1% from a 7.1% growth. The govt spending linked public administration segment grew at 7.2% v/s 5.6%.
The private corporate sector growth (which has a share of around 70 percent in the manufacturing sector) as estimated using available data of major listed companies was 8.1 percent at current prices during April-December 2017-18. GVA from quasi corporate and unorganized segment (which has a share of around 21.0 percent in the manufacturing sector) has been estimated using IIP of manufacturing. IIP from manufacturing sector registered a growth rateof 3.8 percent during April-December 2017- 18. The wholesale price index (WPI), in respect of the manufactured products registered a growth of 2.6 percent during April-December, 2017-18 as compared to 0.7 percent during AprilDecember, 2016-17.
According to the information furnished by the Department of Agriculture and Cooperation (DAC), the production growth of food grains during the agriculture year 2017-18 was 0.9 percent as compared to 9.4 percent in the previous agriculture year. Crops including fruits and vegetables account for about 59.0 percent of GDP in ‘agriculture, forestry and fishing’ sector. Around 41.0 percent of GVA of this sector is based on the livestock products, forestry and fisheries, which is expected to register a combined growth of around 5.1 percent in 2017-18.
This Q3 GDP has beaten all estimates, much more than what was expected. This is sure to cheer the markets as this could be the much needed good news which the markets needed.
But in the this current scenario of scams and PSU bank frauds, this tag of being the “fastest growing economy in the world” seems misplaced. Q3 was festival month and after a year of no demand, finally people let lose their purse strings. Thus we can label this as a seasonal factor too.
Yes, going ahead, things will indeed look up but fiscal compression could become the choke point. We have to brace ourselves and wait for a storm brewing on the horizon – rising crude and probability of an intest rate hike in this calendar year. There are solutions but the Govt has an eye on the elections and thus no right action will be taken. We all just need to let go and wait for this storm to tide over. For now, eyes on the Assembly Elections results as this political judgment is expected to give us a fair idea of things to come in the Lok Sabha elections in the months to come.
The next release of quarterly GDP estimate for the quarter Jan to March, 2018 (Q4 of 2017-18) will be on 31.05.2018.