Early signs of a recovery in India’s economy emerged on Monday as the gross domestic product (GDP) for the April-June quarter grew 6.1 per cent, up from 5.8 per cent in the previous quarter. The spectre of drought, however, muted the cheers.
Compared with 7.8 per cent growth in the same quarter last year, the upturn is nothing to get too excited about.
<b1>The economy grew even faster — by 8.6 per cent — in the previous quarter of last year. Thus while the latest GDP figures are enviable given the global situation, the slowdown is visible.
While agriculture grew by 2.4 per cent in this quarter, down from 2.7 per cent in the previous quarter, the manufacturing sector output rose by 3.4 per cent, up from a contraction of 1.4 per cent in the previous quarter.
The figures were in line with analysts’ forecasts. “The worst may be over and we expect to see improved performance in subsequent quarters,” Planning Commission deputy chairman Montek Singh Ahluwalia said.
The stock markets, however, ignored the optimistic data, with the Sensex falling by 1.6 per cent or 256 points to close at 15,667.
The GDP growth is supported by signals from other data as well. Factory output rose 7.8 per cent in June, the strongest growth in 16 months, triggering hopes of a strong economic rebound in the near future.
Data published earlier, including that of automobile sales that grew by more than 20 per cent, had indicated industrial output would expand in July, even though exports faltered.
But there are two big concerns — plunging exports and deficient rainfall — and policymakers cautioned it is not time to open the bubbly yet.
Exports fell by an annual 27.7 per cent in June, the ninth straight monthly fall. They are estimated to have fallen by 28 per cent in July.
Besides, poor agricultural output, because of deficient rainfall, could drag down overall growth. Agriculture accounts for about 17 per cent of the GDP.
“The key near-term risk to the growth trajectory emanates from poor monsoon rainfall,” said Rajeev Malik, an economist at Macquarie Securities.