India’s economy grew 7.1% during April to June, the slowest in 15 months, but a pick up is likely in the next few months riding on good rains, a pay bonanza for government employees and festive-season buying.
The slowdown could also be partly because of a high base effect — a statistical phenomenon that magnifies small changes, although the real fall may not be very large.
Growth of real or inflation-adjusted gross domestic product (GDP) — the value of all goods and services produced in the country — moderated from 7.9% in January to March and from 7.5% in April-June 2015, national income data released on Wednesday showed.
Despite the slowdown, India remains the world’s fastest-growing major economy, ahead of 6.7% growth in China that is battling an industrial deceleration.
The manufacturing sector grew 9.1% during the quarter from 7.3% in the same quarter of the previous year and 9.3% in January to March.
Growth in the construction sector slowed to 1.5% in April-June from 5.6% in the same period of 2015 and 4.5% in January to March 2016.
Abheek Barua, chief economist, HDFC Bank, said: “While an unfavourable base effect is at play, there is a likely slowdown in services sector activity, which alone explains more than half of the moderation in overall growth.”
The latest data came on a day the government eased dispute settlement rules, which will make more funds available and speed up stalled construction and realty projects.
Farm income grew 1.8% during April-June this year, from 2.6% in the same quarter of 2015 and 2.3% in January-March 2016.
The government will be hoping that the recently announced hike in salaries and pensions of 4.8 million central government employees and 5.5 million pensioners will set off a cycle of spending and investment, with people expected to use higher incomes to buy cars and houses.
“Given the good monsoon and the 7th Pay Commission payout effect, we expect the growth to be higher than last year (7.6%), perhaps close to 8%,” economic affairs secretary Shaktikanta Das said.