Economy

GDP growth slows to 7.1% in first quarter

India’s Gross Domestic Product (GDP) growth slowed to 7.1 per cent in the first quarter of this financial year, with private consumption still the mainstay of the expansion.

GDP growth stood at 7.9 per cent in the fourth quarter (January-March) of the previous financial year and at 7.5 per cent in Q1 of 2015-16. The slowdown in the first quarter of this year was mainly driven by a slowdown in mining, construction and agriculture sectors.

“Quarterly GVA (Gross Value Added) at Basic Price at constant (2011-2012) prices for Q1 of 2016-17 is estimated at Rs.27.38 lakh crore, as against Rs.25.51 lakh crore in Q1 of 2015-16, showing a growth rate of 7.3 per cent over the corresponding quarter of previous year,” according to a Ministry of Statistics and Programme Implementation statement.

Monsoon effect

“On the whole, this is more or less on expected lines,” D.K. Srivastava, Chief Policy Advisor, EY India said in an interview. “Construction is possibly subdued due to the monsoon being good. With heavy rainfall, construction is usually stalled. The other issue is that the government has been spending more via revenue expenditure rather than capital expenditure, which would have gone into infrastructure.”

Construction sector

The construction sector grew at only 1.5 per cent in Q1 of 2016-17 compared with 5.6 per cent in the same quarter of the previous year. The mining sector saw a contraction of 0.4 per cent in Q1 of 2016-17 compared with a strong growth of 8.5 per cent in April-June last year.

“In agriculture, the effect of a better monsoon will be reflected more in the next quarter rather than in April-June,” Mr. Srivastava added. The sector grew at 1.8 per cent in the period under review compared with 2.6 in the same quarter of the previous year.

Another concern is to do with the imbalance between private consumption and capital formation, with the former being the main bolster for growth.

One leg

“The worry is that the economy is on one leg,” D.K. Joshi, Chief Economist at Crisil said. “There is excess capacity and a high level of debt in infrastructure companies. Consumption has to keep improving, and once it does, then capacity utilisation will improve.”

However, this is unlikely to happen in this financial year, Mr. Joshi added.

Private consumption expenditure grew 6.8 per cent in the first quarter, slightly slower than the 6.9 per cent in the year earlier period.

“We stick to our forecast of growth around the 7.6 per cent handle, which essentially means that any acceleration from the previous year is likely to be minimal,” said Anis Chakravarty, Lead Economist, Deloitte India.

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Printable version | Aug 9, 2020 12:41:33 PM | https://www.thehindu.com/business/Economy/GDP-growth-slows-to-7.1-in-first-quarter/article14600044.ece

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