The economy is expected to grow at 7.2 per cent this fiscal, against 6.7 per cent in FY18, according to data released by the Central Statistics Office (CSO) on Monday.

This GDP estimate is higher than many other forecasts, but lower than the RBI’s projections. Most private economists have already lowered India’s growth forecast to around 7 per cent for FY19, while the RBI’s estimate is 7.4 per cent.

A closer look at the growth data reveals that per capita income is estimated to rise by over 11 per cent to reach ₹1,25,397.

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Agriculture does better

According to the CSO data, agriculture fared slightly better, and industry, barring mining and quarrying, showed a similar trend. A substantial growth in manufacturing is good news for the job sector, and the manufacturing sector has a multiplier effect on employment.

However, services seems to be lagging behind as two sub-groups — trade, hotels, transport, communication and services related to broadcasting, and public administration, defence and other services — are estimated to grow slower than the previous year.

Ranen Banerjee, Partner and Leader (Public Finance and Economics) at PwC India, said the CSO estimates seem to be on the conservative side and the final numbers would depend on three factors — how oil prices pan out and hence inflation, government spend pre-election in the last quarter and the mood of the economy post conclusion of US-China trade negotiations. “The nominal GDP has been estimated at 12.3 per cent; that is surprising given the muted inflation outlook,” he said.

The methodology

Economic growth, as reflected by GDP (Gross Domestic Product), records progress in eight groups of goods and services which is distributed in three main categories: Agriculture (combined with forestry and fishing), Industry (manufacturing, mining & quarrying, electricity, gas, water supply and other utility service and construction) and Services (trade, hotels, transport, communication and services related to broadcasting, financial, real estate and professional services and public administration, defence and other services).

A combination of these is tabulated first as Gross Value Added (GVA). Then tax is added and subsidy subtracted to get the GDP.

Agriculture has a share of nearly 14 per cent, while industry has a little over 30 per cent and the remaining 56 per cent belongs to services.

CSO data also reveals that the per capita net national income in 2018-19 will be ₹1,25,397, showing a rise of 11.1 per cent as compared to ₹1,12,835 during 2017-18.

GFCF to rise

Gross Fixed Capital Formation (GFCF), a barometer of investment, at current prices is estimated at ₹55.58 lakh crore in 2018-19, against ₹47.79 lakh crore in 2017-18. At constant (2011-12) prices, the GFCF is estimated at ₹45.86 lakh crore in FY19, against ₹40.88 lakh crore in FY18.

In terms of GDP, the rates of GFCF at current and constant (2011-12) prices during FY19 are estimated at 29.5 per cent and 32.9 per cent respectively, against the corresponding rates of 28.5 per cent and 31.4 per cent respectively in FY18.

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