India's Q1 GDP growth slows to 6-quarter low of 7.1%; July infra dips to 3.2%

New Delhi: Showing signs of moderation, India's economic growth rate slipped to 6-quarter low of 7.1 percent in April-June, while infrastructure sector output decelerated to 3.2 percent in July.

GDP growth slowed mainly due to subdued performance of mining, construction and farm sectors. The economy had expanded at 7.5 percent in the April-June quarter of last financial year, 2015-16.

The growth was 7.9 percent in the January-March period -- fourth quarter of last fiscal.

The previous low of GDP growth was 6.6 percent in the October-December period of the 2014-15 fiscal.

 

Besides, the growth of eight core infrastructure sectors slowed to 3.2 percent in July compared to 5.2 percent in June this year due subdued performance of coal, fertilisers, steel, cement and electricity segments.

Finance Ministry attributed the slowdown in GDP to higher subsidy outgo but exuded confidence that good monsoon and impact of pay commission award will push the economic growth close to 8 percent this fiscal.

"Given the good monsoon which we had this year, the 7th Pay Commission payout effect and various structural reform measures which the government has taken we expect the growth to be higher than what we achieved last year (7.6 percent), perhaps close to 8 percent," Economic Affairs Secretary Shaktikanta Das told reporters.

Industry body Assocham suggested that policy makers take steps to free up the credit flow to productive sectors of the economy so that current growth is supported.

According to the data released by the Central Statistics Office (CSO), the Gross Value Added (GVA), which is estimated at the basic prices, showed a growth of 7.3 percent in the first quarter of 2016-17.

 

The economic activities which registered growth of over 7 percent in the April-June quarter, over year-ago period, are manufacturing; electricity, gas, water supply & other utility services; trade, hotels, transport & communication and services related to broadcasting; financial, insurance, real estate and professional services and public administration, defence and other services.

Growth in agriculture; forestry and fishing; mining & quarrying and construction is estimated to be 1.8 percent, (-)0.4 percent, and 1.5 percent respectively.

The worrying factor, however, has been decline in the Gross Fixed Capital Formation which is an indicator of investment activity in the economy.

According to the data, Gross Fixed Capital Formation declined by 1.1 percent at current prices in first quarter compared to a growth of 6.8 percent a year ago.

"Lower industrial growth & negative growth in gross fixed capital formation being analysed. Proactive policy responses of Govt will continue," Das said in a tweet.

 

However, on the positive side, the growth in private final consumption expenditure at current prices, which is an indicator of demand in economy has grown at 11.7 percent in first quarter.

Commenting on the GDP data, FICCI president Harshavardhan Neotia said that although the first quarter numbers reported moderation, "we expect growth to gain momentum in the second half of the current fiscal year. The good monsoon is a huge positive and an improvement has been noted in the kharif acreage. The agriculture sector performance is likely to pick up giving an impetus to rural consumption."

The data further revealed that growth in GVA at basic prices during the April-June quarter is estimated at 7.3 percent as compared to the growth rate of 7.2 percent a year ago.

The agriculture, forestry and fishing sector has shown a growth of 1.8 percent in its GVA during the first quarter of this fiscal as against the growth rate of 2.6 percent in the year-ago period.

Growth in mining and quarrying was (-)0.4 percent during the first quarter as against the growth rate of 8.5 percent in the corresponding period of last fiscal.

The manufacturing sector registered 9.1 percent growth during first quarter of the current fiscal, compared to 7.3 percent a year ago.

The construction industry is estimated to have grown by 1.5 percent in first quarter as against 5.6 percent year ago.

 

GVA growth in services sector during first quarter is estimated at 9.6 percent as against 8.8 percent year ago.

GVA growth in trade, hotels, transport, communication and services related to broadcasting sector in first quarter is estimated at 8.1 percent as against 10 percent a year ago.

Public administration, defence and other services have grown at 12.3 percent as against 5.9 percent a year ago.

According to the statement, the growth in collection of Union Excise duties, custom duties and service tax was 61 percent, 18 percent and 29 percent respectively in the first quarter of this fiscal, as against growth of 104 percent, 22 percent and 14 percent respectively a year ago.

It also said that the major subsidies grew by 53 percent in first quarter of this fiscal as against decline of 26 percent a year ago.

As regards eight core sectors - coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity - they expanded by 3.2 percent in July, as against 1.3 percent in same month last year.

The core sectors, which contributes 38 percent to the country's total industrial production, recorded a cumulative growth of 4.9 percent during April-July period of the current fiscal.

Refinery production expanded by 13.7 percent in July as against 2.9 percent in the year-ago month.

Coal output expanded by 5.1 percent. In July 2015, the segment had contracted by 0.1 percent.

Natural gas production witnessed a growth of 3.3 percent as against a decline of 4.4 percent in the same month of the last financial year.

The data revealed that steel sector contracted by 0.5 percent while cement production witnessed a growth of 1.4 percent in July. Electricity generation, however, slowed on annual basis.