Sending the first signs of a recovery, the economy grew at a higher-than-expected 4.8 per cent in the second quarter, mainly on the back of a robust 4.6 per cent increase in farm output and a good showing by the electricity (7.7 per cent), construction (4.3 per cent) and financial services (10 per cent) sectors.
The agriculture sector had recorded modest 1.7 per cent growth in the same quarter of the last fiscal year.
However, a poor showing by the manufacturing and mining sectors kept the GDP growth under 5 per cent for the fourth straight quarter. Manufacturing grew just 1 per cent, while mining output shrank 0.4 per cent, according to official data released on Friday. The latest GDP growth is higher than the 4.4 per cent rise recorded in the first quarter this fiscal, but much lower than the 5.2 per cent recorded in July-September last fiscal. For the six-months ended September 30, the economy grew 4.6 per cent, lower than 5.3 per cent growth in same period last fiscal.
The economy has been hit hard by dipping demand, indicated by low private final consumption expenditure, which grew 2.16 per cent this quarter against 2.54 per cent in the corresponding previous period. High interest rates are blamed for the low demand.
With persistent inflation, the RBI has not been able to lower key rates. This may, it is feared, stay its hand yet again on December 18 despite the continuing sluggishness in the economy.
Economic Affairs Secretary Arvind Mayaram expressed happiness over the second-quarter performance. “There were many people who were predicting that growth will be less (than in the first quarter). I believe in the third and fourth quarters you will see a pick up,” said Mayaram. He expects overall economic growth in the current fiscal to be 5 per cent-plus.
Planning Commission Deputy Chairman Montek Singh Ahluwalia also expressed confidence that growth would pick up in the second half. The economy is now in much better shape, he noted.
INDUSTRY WORRIED
But India Inc is worried. Chandrajit Banerjee, Director-General, Confederation of Indian Industry, said GDP growth of below 5 per cent for the fourth consecutive quarter is worrisome. Assocham President Rana Kapoor called for immediate steps to boost the manufacturing and mining sectors.