The Central Statistics Office (CSO) said on Monday that India is set to grow 7.4 per cent and cross the $2.1-trillion mark this year against 6.9 per cent in 2013-14.
India grew 7.5 per cent in the October-December quarter, according to the estimates released, overtaking China’s 7.3 per cent growth in the same quarter, to become the fastest growing major economy in the world.
The smart economic pick-up is largely on the back of robust manufacturing sector performance and a surge in public expenditure.
Capital formation, an indicator for the investment growth in the economy, dropped to 29.8 per cent during April-December 2014 from 30.7 per cent in April-December 2013.
The overall economic situation in the country is looking better and the basic parameters of the Indian economy are moving in the right direction, Union Finance Minister Arun Jaitley said ahead of the release of the advanced estimates by CSO. “India’s growth rate would be better than last year as per the old system,” he said addressing a parliamentary consultative committee.
Releasing the advance estimates based on a new way of calculating gross domestic product (GDP), CSO Additional Director-General Ashish Kumar told reporters that the methodology was consistent with global norms.
“The government can immediately use these numbers for policy-making,” he said, replying to a question on a reported statement of Chief Economic Advisor Arvind Subramanian about his reluctance to use the revised estimates for policy purposes. Mr. Kumar also said that though the estimates put India’s growth ahead of China, the fact was India’s economy was many times smaller in size than China’s and, therefore, the two could not be compared.
The manufacturing sector grew 10.1 per cent in the October-December quarter, against 8.7 per cent in the previous quarter. Public services grew 20 per cent against 6 per cent.
The estimates show a sharp unexpected dip in construction growth to 1.7 per cent in the three months from October to December in 2014 from 7.3 per cent in the July-September quarter. Agriculture output contracted minus 0.4 per cent during the October quarter on the back of the unfavourable kharif harvest.
With the advance estimate for the nominal GDP for 2014-15 of Rs. 126 trillion being somewhat lower than the level assumed in the Union budget Mr. Jaitley presented in July, the Finance Minister’s stated challenge of restricting the fiscal deficit to 4.1 per cent of GDP has become more stringent, said Aditi Nayar, Senior Economist, ICRA.
The advance estimates are on a new base year of 2011-12 against 2004-05 used earlier.
The coverage is also greater with manufacturing now including previously under-represented sectors supplemented with data from the government’s corporate database.