SOURCE : ECONOMIC TIMES
economy grew by 7.9 per cent in the first quarter (April-June) of the current fiscal, the slowest in the past three-and-half years. The economy had grown by 9.2 per cent in the first quarter of 2007-08. This tallies with the Prime Minister’s Economic Advisory Council’s growth forecast for this fiscal at 7.7 per cent. Significantly, growth in investment expenditure has fallen to 9 per cent. Investment growth had been in double-digit numbers all from FY04 to FY08. However, fixed capital formation remains strong at 32.3 per cent of GDP, against 32 per cent a year ago. Agriculture, with a weightage of 17.8 per cent in total GDP, grew 3 per cent, industry, with a weightage of 26.6 per cent, grew 6.9 per cent and services, with a weightage of 55.6 per cent, propped up overall growth by moving up 10 per cent. Manufacturing, the largest subsegment of industry, grew just 5.6 per cent in Q1. Finance minister P Chidambaram exuded confidence that for the entire fiscal, the economy would grow at close to 8 per cent. Economists were, meanwhile, of the view that the slowdown was consistent with the policy aim of slowing down growth to contain inflation. Sharp drop in growth in manufacturing and electricity generation pulled down the overall GDP growth. Annual manufacturing growth in the first quarter stood at 5.6 per cent, almost half of 10.9 per cent in Q1 last fiscal. In fact, manufacturing growth rate has been coming down quarter after quarter: 5.8 per cent in the fourth quarter of 2007-08 and 9.2 per cent in the quarter before that. Electricity, gas and water sector grew by 2.6 per cent in Q1 of current fiscal compared to 7.9 per cent in the corresponding quarter last year. There was something to cheer though. The agriculture sector grew by a good 3 per cent, belying the expectation that high 4.4 per cent Q1 growth of last year would be a dampener. While overall services growth also moderated from 10.6 per cent Q1 of last year to 10.2 per cent, most of the sectors continued to post double digit growth. Construction threw up a pleasant surprise. Despite anecdotal evidence of a slowdown, construction sector grew by 11.4 per cent as against 7.7 per cent in quarter a year ago. Financial services, hotels and communication grew at a lower rate of 9.3 per cent and 11.2 per cent respectively in first quarter in 2008. “I think the data is not surprising. It was RBI’s aim to bring down growth, which is reflecting in the GDP figures. However, agriculture has done reasonably well growing to 3 per cent on the back of 4.4 per cent growth. Service sector growth has also performed well. The only cause of concern is the slowdown in generation of electricity, the demand for which is always increasing. The growth may slightly moderate further in the coming quarters,” Crisil principal economist DK Joshi said.
economy grew by 7.9 per cent in the first quarter (April-June) of the current fiscal, the slowest in the past three-and-half years. The economy had grown by 9.2 per cent in the first quarter of 2007-08. This tallies with the Prime Minister’s Economic Advisory Council’s growth forecast for this fiscal at 7.7 per cent. Significantly, growth in investment expenditure has fallen to 9 per cent. Investment growth had been in double-digit numbers all from FY04 to FY08. However, fixed capital formation remains strong at 32.3 per cent of GDP, against 32 per cent a year ago. Agriculture, with a weightage of 17.8 per cent in total GDP, grew 3 per cent, industry, with a weightage of 26.6 per cent, grew 6.9 per cent and services, with a weightage of 55.6 per cent, propped up overall growth by moving up 10 per cent. Manufacturing, the largest subsegment of industry, grew just 5.6 per cent in Q1. Finance minister P Chidambaram exuded confidence that for the entire fiscal, the economy would grow at close to 8 per cent. Economists were, meanwhile, of the view that the slowdown was consistent with the policy aim of slowing down growth to contain inflation. Sharp drop in growth in manufacturing and electricity generation pulled down the overall GDP growth. Annual manufacturing growth in the first quarter stood at 5.6 per cent, almost half of 10.9 per cent in Q1 last fiscal. In fact, manufacturing growth rate has been coming down quarter after quarter: 5.8 per cent in the fourth quarter of 2007-08 and 9.2 per cent in the quarter before that. Electricity, gas and water sector grew by 2.6 per cent in Q1 of current fiscal compared to 7.9 per cent in the corresponding quarter last year. There was something to cheer though. The agriculture sector grew by a good 3 per cent, belying the expectation that high 4.4 per cent Q1 growth of last year would be a dampener. While overall services growth also moderated from 10.6 per cent Q1 of last year to 10.2 per cent, most of the sectors continued to post double digit growth. Construction threw up a pleasant surprise. Despite anecdotal evidence of a slowdown, construction sector grew by 11.4 per cent as against 7.7 per cent in quarter a year ago. Financial services, hotels and communication grew at a lower rate of 9.3 per cent and 11.2 per cent respectively in first quarter in 2008. “I think the data is not surprising. It was RBI’s aim to bring down growth, which is reflecting in the GDP figures. However, agriculture has done reasonably well growing to 3 per cent on the back of 4.4 per cent growth. Service sector growth has also performed well. The only cause of concern is the slowdown in generation of electricity, the demand for which is always increasing. The growth may slightly moderate further in the coming quarters,” Crisil principal economist DK Joshi said.
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