Lowering its overall GDP growth forecast for the current fiscal, the Finance Ministry sees the Indian economy growing in the “vicinity of 7.5 per cent” in 2015-16.
This is against the 8.1-8.5 per cent GDP growth projected by the Finance Ministry in this year’s Economic Survey.
The latest growth forecast of “vicinity of 7.5 per cent” for 2015-16 came hours after the central statistics office (CSO) released data on Tuesday showing that the economy may have grown 7.4 per cent in the second quarter.
The second quarter GDP growth print of 7.4 per cent was higher than the 7 per cent growth seen in the first quarter this fiscal.
Reacting to the CSO’s Q2 GDP growth numbers, the Finance Ministry said that the growth for the quarter under review was mainly driven by the pick-up in the manufacturing sector, which had recorded 9.3 per cent growth.
Similarly, fixed investment was showing sign of revival as it had grown 6.8 per cent in the second quarter of current Financial Year 2015-16, the Finance Ministry said..
Further, the service sector growth was still robust at 8.8 per cent in Q2 of 2015-16, with the trade and transport services leading the way, it added.
Meanwhile, the Reserve Bank of India in its monetary policy review on Tuesday kept economic growth projection unchanged at 7.4 per cent for 2015-16.
BNP PARIBAS’ VIEW
Commenting on the Q2 GDP growth number, BNP Paribas Asia Economist Mole Hau said in a research report that the Indian economy performed marginally better than market expectations in the second quarter.
Indian growth came in slightly above the consensus forecast of 7.3 per cent on the GDP measure and also in line with expectations on the Gross Value Added (GVA) measure.
The data cement India’s position as the officially fastest growing emerging market.
Acceleration in manufacturing (in GVA) and fixed investment (GDP) drove the improvement from 7 per cent in first quarter to 7.4 per cent in the second quarter.
When set against the continued contraction in exports, the acceleration in manufacturing activity and fixed investment suggests that the sought-after domestic pick-up is materialising, the research note said.
The hope is that these gains will be sustained, even ratcheted up given the lagged impact of RBI’s 125 basis points of rate cuts as well as the consumption boost from the 7th pay commission hike, it added..
The deficient monsoon remains a key downside risk to agricultural and rural consumption. However, the better-than-expected GVA data leave RBI’s last forecast for GVA growth in 2015-16 of 7.4 per cent on track.