The GDP growth rate in the July-September quarter 2017 has risen to 6.3 percent, the CSO announced today. This rise comes on the back of a five-quarter slide in growth rates, as the Indian economy is showing signs of finally shrugging off the disruptive effects of GCT and demonetization, which had hit the SME and unorganized sectors hard, dragging down growth from 7.5 percent a year earlier.
GDP growth had slowed to a three-year low of 5.7 percent in the April-June quarter, hit by frantic destocking by traders as they rushed to comply ahead of the July 1 rollout of the GST regime and the lingering impact of demonetization.
TCA Anant, Chief Statistician of India, while announcing the data, said the reversal after five quarters of decline “is very encouraging.” The growth pickup is on the back of the mining and manufacturing sectors. The mining industry jumped from a negative growth of 0.7 percent in last quarter to 5.5 percent this quarter. Similarly, manufacturing grew from 1.2percentt to 7 percent. But Agriculture failed to cheer as it recorded a sluggish growth rate of 1.7 percent as compared to 4.1 percent in the 2016 July-September quarter.
Finance Minister Arun Jaitley expressed satisfaction with the rise in GDP growth rate and expressed confidence in achieving a higher growth rate in coming quarters. “The last five quarters had witnessed a downward trend. This marks the reversal of this trend. This also indicates that perhaps the impact of two very significant structural reforms – demonetization and GST – is behind us and hopefully in coming quarters we can look for an upwards trajectory,” he said.
This is in line with other indicators like passenger vehicle and tractor sales, industrial production, electricity generation and rail cargo have all accelerated in the past few months. Also, the the combined index of eight core industries in October, 2017 came to be 4.7 percent, higher as compared to the index of October 2016.
This news has been hailed by the ruling BJP and has clearly acted as a shot in the arm for BJP-led central government ahead of crucial assembly elections in Prime Minister Narendra Modi’s home state Gujarat starting next week. The slowing economy was severely criticised by the opposition as they repeatedly accused the govt of damaging the economy by introducing a hasty GST launch in July along with demonetization.
This news capped off a successful month, economically for the BJP government as Moody’s upgraded India’s sovereign rating to baa2 from baa3 earlier this month and changed the outlook from stable to positive. It’s the first upgrade of India’s rating in 14 years. While Standard & Poor has kept India’s rating at BBB-, it has stated that India presents a stable outlook which shows that growth in next two years will remain strong and fiscal deficits will remain broadly in line with the agency’s forecast.