Macro-economic data released on Monday paint an upbeat picture of the economy, with robust growth and a rebound in manufacturing output. But, this may not influence Reserve Bank of India Governor Raghuram Rajan to cut rates on Tuesday, as inflation remains a concern.

Growth data released by the Central Statistics Office on Monday show that the economy grew 7.4 per cent in the second quarter up from 7 per cent a quarter earlier. It was also well ahead of the 6.9 per cent growth recorded by China in the same quarter. However it was lower than the 8.4 per cent growth recorded in the second quarter of the last fiscal year.

Finance Minister Arun Jaitley said “despite two years of below-par monsoons we are still able to show growth”.

GDP growth for the first half of the fiscal year is now pegged at 7.2 per cent, according to the CSO. The Budget had forecast growth of 8-8.5 per cent for the full fiscal year but analysts expect it to be lower.

“While agriculture continued to surprise positively, construction activities have nearly collapsed. Continued growth momentum of the financial sector and robust manufacturing growth — the highest since Q2 of 2012-13 — is encouraging. Full fiscal growth is likely to be 7.5 per cent,” said DK Pant, chief economist, India Ratings and Research.

However, economists raised concerns over the decline in private final consumption growth by 3.25 per cent in the second quarter over the first quarter.

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The manufacturing sector registered a sharp uptick and grew at 9.3 per cent in the second quarter against 7.2 per cent in the first quarter. With pressure to spur growth, the RBI, in its last policy review in September, had cut key rates by 50 basis points.

“I expect the central bank to keep policy rates unchanged, especially when the US Fed is expected to go in for a policy stance shift in the next 15 days,” said Indranil Pan, Chief Economist, IDFC Bank.

Core sector grows Manufacturing performance improved in October with the output of eight core sector industries rising by 3.2 per cent annually. While crude oil and petroleum refinery production dipped by 4.4 per cent and 2.1 per cent, respectively, fertiliser and cement output saw a sharp rise at 16.2 per cent and 11.7 per cent, respectively.

Meanwhile, government spending continued to rise in October as well, with the Centre’s fiscal deficit at ₹4,11,246 crore or 74 per cent of the Budget Estimate of ₹5,55,649 crore, by October 31, according to data released by the Controller General of Accounts. It was comparatively lower, at 68.1 per cent of the full fiscal target, at the end of September.

While revenue receipts grew to ₹5,90,738 crore or 51.7 per cent of the Budget Estimate, Plan expenditure registered a robust increase to ₹2,70,690 crore or 58.2 per cent of the BE by October 31.

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