Indian Economy – Sept'16 Performance..

Gross Domestic Product (GDP) of the economy recorded growth of 7.3% for quarter ended Sept’16 (Q2’17) as per the data released by MOSPI today. While the figure is slightly better than Q1, the numbers do not appear to inspire confidence for a variety of reasons. The highlight for the quarter is growth of 3.3% in agriculture & related group, the best in last ten quarters. A look at other highlights.

  • GDP – Rs 29.6 lakh crore. GVA – Rs 27.3 lakh crore. (Constant price)
  • GVA growth stands at 7.1%. However, GVA has recorded a decline on sequential basis (although marginally), the first in last twelve quarters.
  • Six of the eight reported segments have reported a sequential decline which looks quite concerning. The situation would most likely get aggravated for Dec quarter due to the impact of demonetisation.
  • Government’s tax revenue net of subsidy outgo (GDP minus GVA) records growth of almost 10%.
  • Growth appears to be receiving a boost from government’s expense in FY17. Public Administration, Defence and Other services recorded highest GVA growth of 12.5%, second quarter of above 12% growth. This contrasts with average growth of 6.5% in FY16.
  • Increasing financial leeway that the government is receiving/expected to receive from the drive against undeclared income should provide further impetus to the segment. Even though the segment does not receive much attention, it is actually sizeable at 80% of manufacturing and 25% bigger than agriculture & allied segment.
  • The two main drivers of the economy, Manufacturing and Financial & Other Services, which together account for 44% of GVA, have recorded growth of 7.1% and 8.2% respectively. However, it’s a decline of 1-2% over Q1 and cause of concern.
  • Worst performing segment is Mining & Quarrying recording second successive quarter of decline at 1.5%. All the three major constituents of the segment, crude oil, natural gas and coal have recorded a decline.
  • In terms of classification based on expenditure, Gross Fixed Capital Formation (GFCF) has decline by as much as 5.6%. GFCF refers to the investment being made in the economy and the decline reflects continued weakness in investment sentiments. The share of GFCF in GDP has come down by more than 5 percentage points over last three years.
  • The other two segments, Private Final Consumption Expenditure (PFCE) and Government Final Consumption Expenditure (GFCE) recorded growth of 7.6% and 15.2%. High GFCE indicates that even government expenditure is going more towards consumption than capital formation.


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