By Ritika Chauhan
The Indian economy has regained the crown of the fastest growing major economy, expanding at the rate of 7.2 percent for the third quarter while surpassing China that has recorded its growth at 6.8 percent for the same quarter. As per the estimates of the Central Statistics Office (CSO), this figure marks a five-quarter high for the economy, indicating that the Indian economy might be recovering from the recent blows of demonetisation and the Goods and Services Tax (GST).
The estimated growth rate for the current fiscal year has now risen to 6.6 percent from the previous estimate of 6.3 percent since the size of the Indian economy is projected to grow to $2.6 trillion by the end of March 2018.
Key growth sectors
The two main sectors that are known to contribute to this growth are the manufacturing sector and the agriculture sector. As per the official data, the manufacturing sector has grown at a rate of 8.1 percent compared to the 6.9 percent in the previous quarter and the agricultural sector at a rate of 4.1 percent compared to the 2.8 percent earlier. Also, the construction sector has grown at the rate of 6.7 percent compared to 6.4 percent during the last quarter. Gross fixed capital formation, that measures investment, has risen by 12 percent. Private final consumption expenditure has grown at 5.6 percent while the government’s final consumption expenditure was up at 6.1 percent.
The data, released this Wednesday, not only suggests a recovery of the Indian economy from the effects of demonetisation but also the fact that as per the latest quarterly corporate earnings data, the consumer demand too, is reviving.
A dual-edged sword
This news, however, has invoked mixed responses. While the Finance Ministry and the Economic Advisory Council believe that this is an evidence of increased economic activity in the country, others believe that it only suggests a mere recovery of the economy from the induced effect of the demonetisation or GST implementation. Confederation of Indian Industry (CII) Director, General Chandrajit Banerjee, has said that this is a noteworthy performance of the economy and that India is at the “threshold of a sustained rebound in growth.”
Pronab Sen, the first Chief Statistician of the country, believes that growth in the construction sector indicates that the government’s investment in infrastructure is yielding results. However, it is also being pointed out that if this number shows increased government spending, the fiscal deficit is bound to hike by the end of the last month of this fiscal year. Some believe that growth in the manufacturing sector shows the fading away of demonetisation induced effects.
All these statistics will no doubt prove to be of big help for the current ruling party, the Bharatiya Janata Party (BJP), as the 2019 Lok Sabha elections are not far.
Featured Image Source: Got Credit on Visual hunt / CC BY
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