India’s gross domestic product (GDP) — the total value of goods and services produced in the country—grew 7.3% in 2014-15 and 7.5% in January to March, although consumer spending and investment activity remained largely muted last year, data released on Friday showed.
Analysts, however, said there were signs of investments picking up and increased spending aided by peoples’ higher disposable income, speedier project clearances and lower loan rates.
According to the national income data for 2014-15, private final consumption expenditure (PFCE) — a gauge to measure household spending—grew 6.3% (in 2011-12 prices) in 2014-15 compared to a 6.2% growth in the previous year.
As a proportion of GDP, PFCE stood at 57% compared to 57.5% in the previous year, reflecting sluggish sales of consumer durables such as cars during last the fiscal year that are mostly bought through loans.
Gross fixed capital formation (GFCF) — a proxy for measuring investment activity — grew 4.6% (at constant prices) in 2014-15, marginally higher than the previous year’s 3% growth.
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As a proportion of GDP, GFCF stood at 30% (at constant prices) down from 30.7% in the previous year—a sign that companies have not added too many capacity lines during the year-ended March 31, 2015.
There are, however, signs of consumer spending picking pace. Domestic passenger car sales grew 18.14% in April, the fastest in the 30 months, as the industry got off to a flying start in the new financial year.
Sale of commercial vehicles grew by 6.5% largely on the back of a 24% jump in sales of heavy trucks and buses that is considered a barometer of the state of the overall economy, according to data collated by industry body Society of Indian Automobile Manufacturers (SIAM).
Official national income data showed that key indicators of railways, such as the net tonne kilometers and passenger kilometers have shown growth rates of 3.5%and 2.4%, respectively during January-March, against the growth rates 1.2% and 0.8%, in the year-ago period.
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Cargo handled at major ports also grew by 4.4% in the last quarter of 2014-15 as compared 1.3% -- perhaps reflecting greater manufacturing activity leading to greater imports of raw material and machinery.
“We expect the cyclical sectors to show a gradual recovery in the coming quarters owing to higher disposable income, easier financial conditions, rising profit margins and continued momentum on project clearances,” said Sonal Varma, economist at broking and research firm Nomura.
The finance ministry said “sectors within control of policy manufacturing and services improved substantially while those beyond the policy control such as agriculture(weather) and exports(foreign demand), did less well.”
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