GDP growth breaks 5-Q slide

Economy makes a turnaround grows by 6.3% in 2nd quarter

"The latest growth outturn is in line with RBI's recent rhetoric and thus shouldn't move the needle on interest rates".

The former finance minister said this after India reported a 6.3 per cent GDP growth rate in the July-September quarter of the current fiscal.

"The September quarter GDP growth, he added, is quite a significant trend reversal and has been driven by pick-up in manufacturing".

This prompted Finance Minister Arun Jaitley to say that the impact of demonetisation and the GST were behind us. However, it can not be said now whether this will mark an upward trend in the growth rate.

After sliding for nearly five quarters, country's economy has rebounded from a three-year low to swell by 6.3 per cent in July-September quarter.

The country's economic growth recovered to more than 6 per cent in the July-September quarter, backed by strong manufacturing, allaying doubts related to disruptions caused by the goods and services tax (GST).

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Chief Statistician T C A Anant said it was indicative of growth returning to normal levels.

The senior Congress leader said, "We should wait for the growth rates over the next 3-4 quarters before we can reach a definite conclusion".

Syncing with recent Moody's upgrade of India's sovereign credit for the first time in almost 14 years, the growth buoyancy comes at a time when the Modi Government has been facing Opposition charges of wrong implementation of demonetisation and GST that disrupted the $2.4-trillion economy.

"Although manufacturing volume growth in Q2 FY18 was not as strong as we had initially expected on the basis of restocking after the GST, rising commodity prices and fewer discounts led to a revival in earnings", Icra Principal Economist Aditi Nayar said. According to Anant, GDP could also be an underestimation on account of sales tax collection as many proxies were used to calculate it but the higher mop up could reflect in the revised growth data.

Mr Anant said, agriculture, forestry and fishing sectors are estimated to have grown by 1.7 per cent.

"Robust growth of 7.6 percent in electricity and other utilities, and 9.9 percent in trade, transportation and communications also powered this acceleration", the FM said, adding "Overall, the services sector recorded a growth of 7.1 percent in the second quarter". Great news that quarterly GDP growth accelerates to 6.3 per cent against 5.7 per cent from the previous quarter.

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