According to the data released on Monday, India’s agriculture sector grew 1.9% during the June quarter, while manufacturing growth was at 7.2%. Trade, hotel, transport and communication, which accounts for almost a fifth of India’s GDP, were the only sector to grow in double digits at 12.8%. The job-generating construction sector grew by 6.9% while financial services grew 8.9% during the quarter. The electricity sector was a major drag on the growth numbers as power generation moved more slowly to 3.2% in the June quarter. Not enough power is being generated because state electricity boards are heavily loaded under debt and can’t pay for their purchases. With the adoption of new GDP series that captures “value added” has had a positive effect on the overall output performance.
The GDP figures are more encouraging this time as the world’s second largest economy – China is facing severe economic stress. Inflation the major cause of concern for India have been very well curtailed thanks to commodity prices downturn especially Crudeoil and Gold. While the economic health continues to be strong and the potential for growth for FDI inflow looks even more pronounced for the developing economy.
RBI have been contemplating a rate cut based on two crucial updates – the US rate hike decision and Indian Monsoon. The chances of a rate cut in September has increased if the US Fed keeps the policy rate unchanged in its September meeting. Weakness in monsoon so far this year might add to inflation while core inflation figures is largely expected to be under comfortable levels. The GDP figures for last quarter have helped reinforce the inherent strength in the economy of India.
– By Komal Manapure