GDP GROWS AT 5.3% IN Q2

New Delhi (TIP): Notwithstanding the improved business sentiment by the Modi government, improvement in economic activity on the ground is yet gradual with GDP growth for the July-September quarter coming in at 5.3%, lower than the first quarter putting the spotlight on interest rate cuts and bigger and speedier reforms. The GDP growth was better than expected due to improved performance of mining, power and certain services sectors. While business sentiment has improved dramatically since the Modi government took over, ground level and anecdotal evidence suggest muted business activity with the economy yet to recover from two years of slowdown.

The real estate sector for instance had its worst Diwali in many years. The Gross Domestic Growth in the second quarter was better than 5.2% of the same period last fiscal but was slower than 5.7% rate achieved in April- June quarter of the current fiscal. There were expectations that September quarter growth would fall to 5-5.1% range. There are worries for the government on the fiscal deficit front also.

The number touched 89.6% of the Budget Estimates for 2014-15 to cross Rs 4.75 lakh crore at the end of October. Assocham president Rana Kapoor said the GDP number has been completely on the expected lines and strengthens the cause for optimism of witnessing some economic recovery in the current fiscal itself. “However, the business confidence that has been generated needs to be converted into increased ground level activity,” he said.

Aditi Nayar, senior economist, ICRA, said the initial growth estimate for Q2 is favourable led by higher-than-expected growth of agriculture and allied activities and community social and personal services, in light of the unfavourable advance estimates for crop production for the 2014 kharif season and slowdown in growth of the Central Government’s revenue expenditure, respectively. Chandrajit Banerjee, Director-General, CII, said there has been a moderate decline in GDP growth over the previous quarter owing to a steep decline in manufacturing output but this does not alter the fact that the economy is on road to recovery as compared to the previous year.

This is borne out from the fact that the economy has notched up a growth of above 5% for the second consecutive quarter during the current year on the back of positive investor sentiment indicating that recovery could be taking shape, albeit gradually, he added.

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