GDP growth accelerates to over 2-year high of 8.2% in Q1

Moody’s Investor Service recently said the government was likely to miss its fiscal deficit target in 2018-19 due to higher than budgeted oil prices and rising interest rate scenario

India`s economy grows at robust 8.2 percent in June quarter

An increase in manufacturing activity accelerated India's GDP growth rate for the first quarter of 2018-19 to 8.2 per cent, official data showed in New Delhi on Friday. Even with the updated base year, experts had been estimating the GDP growth to remain in the range of 7.5-7.6 per cent during the June quarter.

The Quarterly GVA at basic prices for Q1 2018-19 from "agriculture, forestry and fishing" sector grew by 5.3 percent as compared to growth of 3 percent in Q1 2017-18.

India is a massive importer of oil, however, and analysts say high crude prices and a tumbling Indian rupee threaten to derail growth. Economists said a positive feature of the growth dynamics has been the buoyancy in employment-supporting sectors such as construction and manufacturing.

The ministry said that Gross Fixed Capital Formation (GFCF) at current prices stood at Rs 12.75 lakh crore in Q1 of 2018-19 as against Rs 11.20 lakh crore in Q1 of 2017-18.

Britain is now the world's fifth-biggest economy with a GDP of $2.622 trillion previous year. Amid such troubles, the GDP figures come as a relief to the government.

To be sure, there is an element of base effect in the latest growth figures.

Part of this slowdown can be traced to slower growth in public administration, defence and other services, which largely connote government spending.

Ashima Goyal, member of Prime Minister's Economic Advisory Council PMEAC said, "8 percent gross value added (GVA), 8.2 percent gross domestic product (GDP) is really good, but we must remember that it is on a low base last quarter".

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He said, "If you calculate the core GVA, which is basically the private sector, that has actually surged to 8.1 percent as against 7.2 percent".

"Pay Commission/HRA revisions at the state level, where government employee strength is higher than at the Centre, will also provide a transitory boost to consumption demand", said DK Joshi, chief economist, CRISIL.

The rally can be attributed to the manufacturing sector which grew by 13.5 per cent. India's GDP growth rate zooms to 8.2% in the first quarter of 2018-2019 fiscal year.

"We expect RBI to hike rates in March-quarter next year with no changes this year", he said.

Workers assemble tricycles inside a manufacturing unit in Ahmedabad, India, August 30, 2018.

Another important metric to watch for private investment - gross fixed capital formation (GFCF) - accounted for 31.6% of GDP during the quarter, higher than 31% in the same period a year ago. "Q1 growth rate is based on the lowest base (5.6) in the last 8 quarters", he tweeted.

This is the highest growth in two years and strongest since the first quarter of 2016.

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