India’s economy returned to 8 percent growth for the first time in two years, as strong consumer demand has spurred a modest revival in private investment.
Gross domestic product growth in the first quarter of 2018-19 was at 8.2 percent compared with 5.6 percent in the same quarter last year, according to data released by the Central Statistics Office today. In the fourth quarter of 2017-18, GDP growth was at 7.7 percent.
A Bloomberg poll of economists had pegged the growth at 7.6 percent. The range of estimates stretched from a low of 7 percent to a high of 8.2 percent.
In gross value added terms, the economy grew at 8 percent compared to 5.6 percent last year. GVA growth has become a preferred measure of economic growth as it strips out the impact of indirect taxes and subsidies.
All-Round Strength
Strong growth in the first quarter has been supported by a positive base effect due to weak quarter in the comparable quarter. However, economic conditions have also steadily improved as the impact of the twin shocks of demonetisation and GST has faded.
Data for the first quarter showed strong growth in sectors like manufacturing and construction on a GVA basis. Wild card agriculture also showed strong growth.
- The manufacturing sector grew at 13.5 percent compared to -1.8 percent last year.
- The construction sector grew at 8.7 percent compared to 1.8 percent last year.
- The mining sector grew at 0.1 percent compared to 1.7 percent last year.
- The agriculture sector grew at 5.3 percent compared to 3 percent last year.
- The financial services sector grew at 6.5 percent compared to 8.4 percent last year.
Step-Up In Investment
Continued strength in urban consumption demand and hope of stronger rural demand after a good monsoon have spurred some private investment. While large capex from industries like power is seen as unlikely, a fresh round of investments has started from consumer facing industries like automobiles.
The expenditure side data for the first quarter is reflective of these trends. In constant price terms, investment remained positive the fifth consecutive quarter.
- Gross fixed capital formation grew at 10 percent, following 14.9 percent growth in Q4 of FY18
- Private consumption expenditure grew at 8.5 percent after 6.7 percent growth in the last quarter
- Government expenditure rose 7.5 percent compared to 16.8 percent in the last quarter.
(This story was originally published on BloombergQuint)
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