GDP Growth Drops To 7.1% in Q2 From 8.2% in Last Quarter

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(Photo: Reuters)

After peaking in the first quarter of the current year, growth in the Indian economy moderated in the July-September period, as agriculture and industry slowed.

Gross Domestic Product (GDP) grew by 7.1 percent in the second quarter of the financial year compared to 6.3 percent in the same quarter last year, showed data released by the Central Statistics Office on Friday, 30 November. GDP grew at a stronger clip of 8.2 percent in the first quarter of the year, helped partly by a strong base effect.

In Gross Value Added (GVA) terms, the economy grew at 6.9 percent in the July-September period. This, too, was a moderation compared to the 8 percent GVA growth reported in the first quarter.

A Bloomberg poll of 46 economists had estimated GDP growth at 7.5 percent for the second quarter. GVA was estimated to grow at 7.3 percent.

For the full year, the Reserve Bank of India (RBI) expects GDP growth at 7.4 percent. The data released on Friday may lend itself to a downside bias to those growth expectations.

Sectoral Trends

Data for the second quarter showed moderation of growth across agriculture and segments of the industry.

• Manufacturing grew at 7.4 percent in Q2 compared to 13.5 percent in Q1.
• Construction grew at 7.8 percent in Q2 compared to 8.7 percent in Q1.
• The mining sector contracted by 2.4 percent compared to growth of 0.1 percent in Q1.
• The agriculture sector grew at 3.8 percent compared to 5.3 percent in Q1.
• The financial services sector grew at 6.3 percent compared to 6.5 percent in Q1.

For most of these sectors, growth in Q1 had been pushed up not just by a pick-up in activity but also a positive base effect since growth in the comparable quarter from a year ago was low.

Expenditure Trends

The expenditure side of the GDP data showed continued strength in investment.

• Gross fixed capital formation grew at 12.4 percent compared to 10 percent in Q1.
• Private consumption expenditure grew at 7 percent after recording 8.6 percent growth in Q1.
• Government expenditure rose 12.8 percent compared to 7.5 percent in the previous quarter.

(This story was originally published on BloombergQuint.)