It is tempting to see a recovery in Gross Domestic Product (GDP) growth in the first quarter of the current financial year. That sighting, however, will be flawed. The sequential upturn — from 5.8 per cent in January-March 2009 to 6.1 per cent in the next three months — is misleading because India does not put out seasonally adjusted data. Yet as the slippage from growth rates a year ago is arrested — from a 2.5 percentage point decline at the height of the global financial meltdown in October-December 2008, to 1.8 points in the next quarter and 1.6 points in April-June 2009 — things are definitely looking up. At least till the second half of the year when the monsoon shortfall will crop up in the account books.
Broken down, the numbers look more encouraging. The financial sector, including real estate, which contributes nearly as much to national income as agriculture, is growing at a respectable 8.1 per cent. As are trade, hotels, transport and communications. This clutch of services, although growing 5 percentage points slower than a year ago, brings 80 per cent more to the table than farming. Factory output delivered a pleasant surprise in June by growing 7.8 per cent and there is little evidence to suggest that this was an aberration. While it is early to make projections on the eventual size of the summer crop, the decline ought to be offset by fairly robust growth in a bunch of sectors that are individually bigger wedges of the Indian economic pie than agriculture.
The various fiscal stimuli appear to have worked their way into parts of the economy that can keep demand aloft. Transfer payments over 15 months show up in the fact that household consumption as a share of GDP has come down from 58 per cent in April-June 2008 to 55.6 per cent a year later. Over this period, the government went through a hump in consumption before settling near the year-ago level. Money is thus reaching the people who spend. But policymakers have another worry in the declining share of investment in national income. Every percentage point fall in this statistic shaves a quarter of a point in achievable growth. The investment cycle was widely expected to turn anytime now. This recovery could be jeopardised by rising food inflation at home and commodity prices abroad. The central bank has flagged inflation as an emerging concern. Attempts to combat it could hurt growth.