Economy responds to growth impulses

Raising a toast to growth impulses set off by the Narendra Modi government, the Indian economy expanded 5.7 per cent over Q1, the best rate over past nine quarters. The economy had grown 4.6 per cent in the preceding quarter and by a similar rate in this quarter a year ago. Obviously, the economy which had gone under following governance deficit is showing signs of getting back its breadth.

More importantly, the growth came even as agriculture slowed marginally to 3.8 per cent, from 4 per cent during Q1 in 2013-14. Production of coarse cereals and pulses registered growth rates of 11.2 per cent and 6.2 per cent, respectively, and rice and wheat 15 per cent and 2.6 per cent, respectively, during the Rabi season. Among commercial crops, the production of oilseeds increased by 3.0 per cent during the agricultural Rabi season of 2013-14.

Manufacturing, which had declined in 2013-14 following stagnation in the previous fiscal, expanded 3.5 per cent. Even trade, hotels, transport and communication, which suffered decay following reduced activity in the commodity sectors, recovered partially to 2.8 per cent, from 1.6 per cent in Q1 a year ago. The economy has apparently bottomed out and is back finding its feet.

In a major encouraging sign of turnaround in investment, gross fixed capital formation increased 7 per cent, after a decline in 2013-14 and stagnation in the earlier fiscal. In another indicator of some revival in project investment, construction grew 4.8 per cent over Q1, after stagnation in the previous two quarters. Production index of capital goods was up 14 per cent, cement 9.5 per cent, and alloy and non-alloy steel 1.6 per cent during Q1. Investment in valuables continued to drop.

Export of goods and services bounced back with double-digit growth; current account deficit containment was helped further by a decline in import of goods and services.

GDP deflator, a broad indicator of inflation in goods and services, eased from 5.8 per cent to 5.4 per cent.

Finance, insurance and business services slowed from 12.9 per cent to 10.4 per cent, but remained in the double digits expansion phase. Community and personal services including public administration increased 9.1 per cent.

The consumption side of the economy seems to be listless. The final consumption expenditure in the country slowed to 6.2 per cent from 6.8 per cent in Q1 a year ago. Private final consumption expenditure kept the year ago pace of 5.6 per cent, but the growth rate in government final consumption expenditure dropped from 12.9 per cent to 8.8 per cent. Revenue expenditure of the central government increased 11 per cent, half the rate a year ago.

GDP at market prices was assessed at Rs. 28 trillion for the quarter, showing annual increase of 11.6 per cent at current prices.