Indian economy grows 7.3% in September quarter; uncertainty looms for 2nd half due to demonetisation

New Delhi: India remained the fastest growing major economy with its GDP accelerating to 7.3 percent in the September quarter, pushed mainly by farm output, although the momentum may be hit in the coming months by the impact of demonetisation.

The Gross Domestic Product (GDP) or national income which rose from 7.1 percent in the previous quarter is however lower than 7.6 percent recorded in the same period last year.

India overtook China in economic growth rate in 2015, and continues to be the world's fastest growing large economy.

Meanwhile, monthly macro-economic data on performance of eight infrastructure sectors showed six-month high growth of 6.6 percent in October.

According to the data released today by the Central Statistics Office (CSO), the Gross Value Added (GVA), which is estimated at the basic price, growth decelerated to 7.1 percent as compared 7.3 percent both in the previous as well as the year ago period.

The data revealed that over 7 percent growth was recored by 'public administration, defence and other services', 'financial, insurance, real estate and professional services', 'manufacturing' and 'trade, hotels and transport and communication and services related to broadcasting'.

Growth rates in agriculture, forestry and fishing; mining and quarrying; electricity, gas, water supply and other utility services; and construction were at 3.3 percent, (-)1.5 percent, 3.5 percent and 3.5 percent respectively. This compares with 2 percent, 5 percent, 7.5 percent and 0.8 percent year ago period.

Manufacturing slowed to 7.1 percent from 9.2 percent in the year-ago period.

On the impact of demonetisation of old Rs 500/1000 notes on growth prospects, Chief Statistician T C A Anant said statements made by experts on the adverse impact of demonetisation is made without any data.

"People make assumptions and based on that they make statements. Once the data comes in, I will make a statement," he said at a press conference.

Chief Economic Adviser Arvind Subramanian said: "What we have for first half are actual numbers. It shows good consistent performance. For second half we will have to see, there are a lot of uncertainty. We have to analyse it before we say something".

What is worrying however is the decline in Gross Fixed Capital Formation (GFCF) an indicator of investment.

GFCF growth rates at current and constant prices are estimated at (-)3.2 percent and (-)5.6 percent during Q2 of 2016-17 as compared to 7.5 percent and 9.7 percent during Q2 of 2015-16.

Talking about challenges, Subramanian said investment was down substantially in the second quarter and that is something that needs to be watched.

Referring to the impact of demonetisation of 500 and 1000 rupee notes by the government earlier this month, CII Director General Chandrajit Banerjee said that it would be a "temporary setback" to growth in the coming quarter.

As per CSO, GDP at constant (2011-12) prices in the second quarter of 2016-17 is estimated at Rs 29.63 lakh crore, as against Rs 27.62 lakh crore in the year-ago period.

The quarterly GVA at basic price at constant (2011-12) prices for July-September is estimated at Rs 27.33 lakh crore, as against Rs 25.52 lakh crore year-on-year.

Government Final Consumption Expenditure (GFCE) at current prices is estimated at Rs 5.15 lakh crore for the second quarter as against Rs 4.27 lakh crore year ago.

At constant (2011-2012) prices, the GFCE is estimated at Rs 3.84 lakh crore as against Rs 3.33 lakh crore.

In terms of GDP, the rates of GFCE at current and constant prices during the second quarter are estimated at 14.1 percent and 13 percent respectively, as against the corresponding rate of 13.1 percent and 12.1 percent in the same period of 2015-16.

Chief Statistician Anant also informed that the 'advance estimates' for national accounts data for the current fiscal will be released on January 7, a month in advance.

The data release date is being advanced as government would be presenting Budget a month ahead of the usual practice of unveiling it on last working day of February.

The data on eight core infrastructure sector recorded a growth rate of 6.6 percent in October on the back of impressive performance by steel and refinery products.

However, growth rate of power generation, fertiliser production and cement output fell considerably on year-on-year basis. Coal production continued to fall for the third straight month.

The core infrastructure sectors -- coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity -- showed 3.8 percent in October last year.

Core sector contributes 38 percent to the total industrial production.