India GDP growth at 7.3% in Q2, but note ban weighs on year-end target

Government’s target of surpassing last year’s 7.6% growth this year will be difficult due to the impact of demonetisation


India’s economy witnessed a marginal acceleration, growing at 7.3% in the second quarter of 2016-17. Photo: Mint
India’s economy witnessed a marginal acceleration, growing at 7.3% in the second quarter of 2016-17. Photo: Mint

New Delhi: India’s economy witnessed a marginal acceleration, growing at 7.3% in the second quarter of 2016-17. Gross Domestic Product (GDP) expanded by 7.1% in the first quarter of 2016-17 and at 7.6% in the corresponding quarter last year.

However, expectations are that growth will suffer a setback in the second half of the year on account of the impact of demonetisation. This will make the government’s target of surpassing last year’s 7.6% growth this year difficult.

A Reuters poll of economists forecast that the economy will grow at 7.5% in the July-September quarter.

The pick-up in growth in the second quarter was led by agriculture which grew at 3.3% in the quarter. Manufacturing grew at 7.3% while mining and quarrying declined by 1.5%. Gross fixed capital formation, an indication of the investment demand continued to contract at -5.6%.

Another measure of economic activity—gross value added (GVA)—showed the economy growing at 7.1% in the September quarter as against 7.3% in the June quarter.

GDP growth is arrived at by adding net indirect taxes (indirect taxes–subsidies) to GVA. A higher GVA in the June quarter means the government’s subsidies were higher than indirect tax collections in the quarter.

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