India’s government changed the way it calculates GDP in January, saying the new method was closer to worldwide standards. While agriculture growth has slowed down from 2.4% in the first half of the last year to 2% in the first half of the current year, the industrial pick up has slipped from 7.6% to 6.7% and that of services have come down from 9.6% to 8.8% pushing down overall growth of the GVA from 7.9% in the first half of the last year to 7.2% in the current year.
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But while growth of more than 7% would be a dream for most countries, India needs to grow even faster if it is to create jobs for its large population. The sector is estimated to have grown by 9.3% during the September quarter. During the same period a year ago, the economy grew 8.4%.
India’s Gross Domestic Product (GDP) grew at 7.4% for the second quarter of the current financial year. Modi is focussing on reforms to accelerate growth and hopes to convince his opponents to implement a much-delayed national sales tax in 2016.
India’s central bank is expected to keep interest rates unchanged when it meets on Tuesday, after a sharper than expected 50 basis point cut at its last meeting, as it looks to control price rises ahead of a tighter 2016 inflation target. However in the services sector the GVA growth rate has slipped marginally from 8.9% to 8.8%.
The economy is not firing on all cylinders and, in the view of some analysts, growth has been driven more by consumption than investments.
A drought in parts of the country for the second straight year has hurt farm output and rural wages – hitting demand for farm machinery like tractors as well as consumer goods. The acceleration in economic growth will come as a boost to the government, which has identified getting the economy back on rails as the top-most priority.
With fellow BRICS partner Russian Federation contracting 4.1 percent in the same period and Brazil predicted to shrink 4.2 percent, India is a rare bright spot in a struggling world economy.
Sharp falls in the cost of oil and gold imports are reducing the trade deficit and giving a net boost to economic activity.
RBI is expected to maintain interest rates after consumer inflation rose to 5% in October and the strong manufacturing growth numbers.
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Monday’s numbers were the latest growth data to be released since the government introduced a revised formula for calculating GDP that some analysts have criticized.
