The Central Statistical Office (CSO) on 30 November 2016 announced that India’s Gross Domestic Product (GDP) accelerated to 7.3 percent in the second quarter (July-September) of 2016-17 financial year from a provisional 7.1 percent expansion in the previous quarter.
On the other hand, the Gross Value Added (GVA) increased to 7.1 percent. While GDP growth accelerated in the second quarter from the 7.1 percent seen in the April-June quarter, GVA growth slowed from the 7.3 percent registered in that period.
Both GDP and GVA growth were slower in Q2 of this financial year as compared with the Q2 of 2015-16. The Q2 of 2015-16 showed a GDP growth of 7.6 percent and GVA growth of 7.3 percent.
• The agriculture sector maintained the overall growth by registering a 3.3 percent GVA growth rate in Q2 of this financial year in comparison with 2 percent in Q2 of 2015-16.
• The manufacturing sector saw a significant slowdown as it registered a GVA growth of 7.1 per cent in Q2 of this financial year as compared with 9.2 percent in Q2 of 2015-16.
• The mining and quarrying sector slowed down by 1.5 percent in Q2 compared with the contraction of 0.4 percent in the first quarter and a growth of 5 percent in Q2 of 2015-16.
• Output in sectors such as manufacturing, electricity, mining, services and others show a fall in the September quarter because they are not supported by demand.
• There was a drop in outputs across all sectors except for agriculture, construction and public administration.
• Gross fixed capital formation was only 29 percent of GDP in Q2 of this financial year as compared with 32.9 percent in Q2 of 2015-16.
• On the other hand, Government final consumption expenditure was 13 percent of GDP in the second quarter of this financial year compared with 12.1 percent in the previous year.
• Government final consumption expenditure (GFCE) grew 18.8 percent in Q1 of FY 2016-17 and 15.2 percent in Q2 of FY 2016-17.
• Union Government’s Capital Expenditure (Plan and non-Plan) declined 12.81 percent to Rs 124959 crore in the quarter against Rs 143329 crore in the year-ago period.
GDP growth numbers for the first half of the current fiscal year revealed a good and consistent performance but lot of uncertainty remains on the outlook for the second half of the year with the implementation of demonetisation plan of PM Narendra Modi.
With the scraping of Rs 500 and Rs 1000 banknotes as a part of the attack on tax dodgers and black money launderers, the outlook for upcoming quarters is not encouraging as this decision has removed 86 percent of the currency in circulation in a country where most of the transactions are done in cash.
Supply chains of all sectors have already crumbled up. Trucks are stuck with no money for fuel, farmers have run out of cash, workers and labourers are not loading goods for free and the distributors are unable to make payments. Moreover, the Wholesale markets in many cities are shut.
At this point of time when India remains the world’s fastest growing major economy ahead of 6.7 percent GDP of China, uncertainties hover over India's ability to hold on to the accelerating growth following the demonetisation drive.
Who: India's GDP
When: 30 November 2016