Stronger growth of 7.7% in the fourth-quarter GDP estimates for 2017-18, driven in large part by the manufacturing and construction sectors, led to an upward revision in the GDP growth projection for the full year to 6.7%, official data released on Thursday show.
The fourth-quarter growth was the strongest in the entire financial year 2017-18, with the economy expanding by 5.6% in the first quarter, at a 6.3% pace in the second, and by 7% in the October-December period. The government had earlier forecast full-year growth at 6.6%. Growth in 2017-18 was notwithstanding the upward revision, however, still slower than the 7.1% pace posted in 2016-17.
The manufacturing sector grew at 9.1% in Q4 of 2017-18, faster than the 6.1% seen in the year-earlier quarter. Overall, the sector is estimated to have grown at 5.7% over 2017-18, compared with 7.9% in 2016-17.
‘Hint of a turnaround’
“Capital formation is another area where growth has been strong, along with manufacturing and construction, which grew strongly on the back of negative growth in Q4 last year,” Economic Affairs Secretary Subhash Chandra Garg said at a press conference. “These indicate a turnaround in the economy and should also give a boost going forward.”
“Sequential growth in manufacturing has picked up in Q3 and Q4, which suggests that the impact of GST is behind us,” said Chief Economic Advisor Arvind Subramanian.
“With the contribution of net export growth being negative in all four quarters of 2017-18, growth has clearly been driven by domestic factors,” D.K. Srivastava, Chief Policy Advisor at EY India said.
The construction sector witnessed a robust growth of 11.5% in the fourth quarter of 2017-18, compared to a contraction of 3.9% in the same quarter of the previous year. This turnaround in the sector propelled its full-year growth to 5.7% in 2017-18 from 1.3% in 2016-17.
The agriculture sector in the fourth sector grew faster than any previous quarters in 2017-18, at 4.5%, but this was still slower than the 7.1% seen in the fourth quarter of the previous year. Overall, the sector grew at 3.4% in 2017-18, compared with 6.3% in 2016-17.
Gross fixed capital formation, a proxy for the amount of investment in the economy, grew 7.6% in 2017-18 compared with 10.1% in the previous year. Similarly, private final consumption expenditure grew at 6.6% in 2017-18, down from 7.3% in the previous year.
“Currently, the Indian economy is in a sweet spot, with most macro-prints on the upside, especially seen in terms of broad-based industry growth, improving sales data, and positive sentiment as evidenced through the purchasing managers’ index (PMI),” Anis Chakravarty, Lead Economist and Partner at Deloitte India said.
“However, despite a general upside sentiment, the economy remains vulnerable to external risks, key among them is the anticipated rise in crude price and input costs.”
