Monday, 31 August 2015

Indian economic growth slowed in Q1

Monsoon rainfall is a crucial element of economic growth in India, where more than half the farmland is rain-fed. Photo: Hindustan Times
New Delhi: India’s economic growth slowed to 7% in the fiscal first quarter ended 30 June from 7.5% in the preceding three months.
Reuters poll of economists had estimated first quarter gross domestic product (GDP) growth at 7.4%.
Agriculture grew 1.9% during the June quarter, while manufacturing growth was pegged at 7.2%. Trade, hotel, transport and communication was the only sector to grow in double digits at 12.8%. The job-generating construction sector grew at 6.9% while the financial services sector grew at 8.9% during the quarter.
During the April-June quarter, while China claimed its economy grew at 7% amidst scepticism by most analysts, the US economy grew at an unexpected 3.7% during the same period.
International credit assessor Moody’s Investors Service cut its India growth forecast by half a percentage point from the 7.5% it estimated earlier to 7% due to below-normal monsoon rain and the resultant impact on rural demand. The government expects GDP to expand at a minimum 8.1% in 2015-16. The International Monetary Fund and the Asian Development Bank have forecast growth of 7.5% and 7.8%, respectively.
So far, the rainfall deficit in east and northeast India is 13% and central India 9%. South peninsular India has a rainfall deficit of 20% and north-west a surplus of 1%.
The country will receive only 84% of the 50-year average rainfall in the second half of the June-September monsoon season this year, the weather forecaster said.
Monsoon rainfall is a crucial element of economic growth in India, where more than half the farmland is rain-fed. In 2014-15, deficit rain during the kharif (monsoon crop) season and unseasonal showers ahead of the winter harvest led to a drop in foodgrain production, but the fourth advanced estimates released by the agriculture ministry earlier this month showed that the impact of deficit monsoon was less than earlier estimates.
The government of Prime Minister Narendra Modi has been striving to quicken growth in Asia’s third-largest economy since it took office in May last year, promising a spending boost and moving to clear up a regulatory logjam that has held up large infrastructure projects.
In its annual report released last week, the Reserve Bank of India said the growth outlook for the Indian economy is improving gradually as business confidence remains robust, even as it reiterated its GDP growth forecast of 7.6% in 2015-16, up from 7.2% reported in 2014-15. The central bank, however, looks at gross value added at basic prices for measuring the economic growth against the internationally comparable measure of GDP at market prices.
Data separately released by the Controller General of Accounts showed the government exhausted 69.3% of its fiscal deficit target for the current fiscal within the first four months (April-July) against 61.2% during the same period a year ago.
While non-plan expenditure jumped to 33.8% of the allocation during April-July period, from 30.5% during the same period a year ago, growth in plan expenditure was substantial, at 33.9% of target, against 23% during the same period last year, signalling more focus on spending that creates durable assets.

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