The Indian economy grew at 7.3 per cent in 2014-15 due to improvement in the performance of both services as well as manufacturing sectors.
According to the data release by the Central Statistics Office (CSO) today, the economic growth was 6.9 per cent in 2013-14 as per the new series of national accounts with base year of 2011-12.
The growth in 2014-15 was lower than the advance estimates of 7.4 per cent released in February.
The fourth quarter (January-March) of last fiscal saw the economy grow at 7.5 per cent, better than 6.6 per cent recorded for the previous three months, October-December.
The Gross Value Added (GVA), a new concept introduced by CSO to measure the economic activity, rose by 7.2 per cent in 2014-15 compared 6.6 per cent in the previous fiscal.
The manufacturing sector GVA rose by 7.1 per cent during the year as against 5.3 per cent in 2013-14. Similarly, the output of electricity, gas, water supply and other utility services rose by 7.9 per cent as against 4.8 per cent a year ago.
The construction activity too registered an increase of 4.8 per cent, up from 2.5 per cent a year ago. Financial, real estate and professional services also showed an improvement by registering a growth of 11.5 per cent as against 7.9 per cent in previous fiscal.
However, the farm and allied sectors grew by a meagre 0.2 per cent compared to 3.7 per cent a year ago.
The output of mining and quarrying sector too slipped to 2.4 per cent from 5.4 per cent a year ago.
The economic growth rate measured in terms of GVA in the January-March quarter improved to 6.1 per cent as against 5.3 per cent a year ago.
The manufacturing sector recorded a growth rate of 8.4 per cent during the last quarter of last fiscal, up from 4.4 per cent a year ago. The services sector too witnessed marked improved during the quarter.
However, agriculture and mining and quarrying sectors remained laggards in the January-March quarter. The data showed that farm output during the quarter declined by 1.4 per cent as compared to a growth of 4.4 per cent in the corresponding quarter of the previous fiscal.
The output of mining and quarrying sector decelerated to 2.3 per cent in the fourth quarter of the last fiscal as compared to a growth of 11.5 per cent during the same period in 2013-14.
It further said that per capita income at current prices during 2014-15 rose by 9.2 per cent to Rs 87,748 as against Rs 80,388 in the previous fiscal. It was Rs 64,316 in 2011-12 and Rs 71,593 in 2012-13.
Below are comments from analysts on the data:
D.K. JOSHI, CHIEF ECONOMIST, CRISIL, MUMBAI
“There is some disconnect between the GDP numbers and the situation on the ground.
“I think there are methodological issues. That is why there is a variance between the volume indicators available at the ground level and value indicators which are being increasingly used in the computation of the GDP.
“It will take us some time to understand that. These numbers should not influence the central bank.
“We expect the central banks to cut rates by 25 bps on June 2.”
RADHIKA RAO, ECONOMIST, DBS, SINGAPORE
“The RBI Governor has highlighted his reservations on the new data series.
“Hence policy makers are likely to infer the growth momentum from other lead indicators like industrial production, non-oil non-gold imports, and PMIs (purchasing managers indexes). The common undercurrents there are that a recovery is taking place, but it has been a very gradual process.
“To that extent, the recovery trend will be interpreted as modestly positive and not as strong as the new headline GDP seems to suggest. We reckon Tuesday’s rate cut is still on the table.
ABHISHEK UPADHYAY, ECONOMIST, ICICI SECURITIES PRIMARY DEALERSHIP LTD, MUMBAI
“This data is based on value-added, so it is difficult to feel and correlate with what is happening to high frequency data like credit growth, rural and urban wages and passenger car sales, which are all still weak.
“RBI will have to feel its way in the economy to get an idea about prices and be confident about their inflation projection. We expect the RBI to cut the repo rate by 25 basis points.”
SHILAN SHAH, INDIA ECONOMIST, CAPITAL ECONOMICS, LONDON
“At face value, today’s GDP figures for (January-March) suggest that India is the fastest-growing major economy in the world. In reality though, the GDP data remain wildly inconsistent with numerous other indicators that point to continued slack in the economy.
“The big picture is that the official GDP data are overstating the strength of the economy, most probably by a significant margin.
“The Reserve Bank (of India) appears to be putting more emphasis on indicators such as capacity utilisation, bank lending, sales of consumer goods and core inflation in policy decisions. On these measures, the case for further policy loosening remains strong.
SHUBHADA RAO, CHIEF ECONOMIST, YES BANK, MUMBAI
“The downward revision in Q3 suggests some loss of momentum began in the second half of FY2015.
“The GVA (gross value added), however, has a different story to tell, showing a marked sequential slowdown from Q2 onwards, implying that larger growth has come on account of net taxes on products.
“Agriculture, electricity, construction, finance and public services sectors have slowed in the last quarter.
“Worries of disconnect persist. High frequency data suggests a larger slowdown in Q4 and not in Q3. We continue to rely on high frequency indicators. Challenges remain for understanding the deviations”.
Union Road and Transport Minister Nitin Gadkari today said lack of appropriate policies forced India’s development to take a backseat but now corrective measures are on to propel economic growth.
“India lacked appropriate policies at appropriate time…It lacked vision…Unanimity is needed on the agenda of development and all political parties should join hands on this. The government has initiated a slew of steps to take the economy forward,” Gadkari said.
He said wrong policies had resulted in the crisis faced by the agrarians and advocated, “We have to diversify agriculture to energy and power sectors…Energy crop is needed and farmers contribution could be enormous in reducing huge Rs 8 lakh crore import bills on crude and oil.”
Citing an example of such wrong policies, he said had India entered into a pact with Iran for Chahbahar port which gives it sea-land access route to Afghanistan bypassing Pakistan, there would have been huge dcline in urea prices.
Terming poverty, hunger and disease as India’s biggest problem he said farmers were driven to suicides and time has come to seriously introspect as to what policies were correct for a nation like India.
“Innovation, entrepreneurship, technology and knowledge can change India’s fate,” he said adding, Prime Minister Narendra Modi is working in this direction.
Arun Jaitley rebuts Manmohan’s comments, says economy not fragile
Dismissing former Prime Minister Manmohan Singh’s comments on the state of Indian economy, Finance Minister Arun Jaitley today said an economy growing at fastest pace in the world cannot be ‘fragile’.
“In a global slowdown situation, to have the fastest growth rate in the world certainly does not make Indian economy fragile,” he told reporters here.
Jaitley made these comments when asked about the Singh’s statement that recovery in the Indian economy was very fragile.
The Finance Minister said the fourth quarter (January-March) GDP growth of 7.5 per cent and 7.3 per cent for the entire financial year 2014-15 indicate that the economy is in “recovery mode”.
The silver lining in the GDP number is the manufacturing sector which registered 8.4 per cent growth in the fourth quarter and 7.1 per cent for entire 2014-15.
“Manufacturing and services indicate that we have a potential to grow at 8-9 per cent and beyond,” Jaitley said.
The fourth quarter GDP data “gives us a broad idea of how the Indian economy is moving. It is absolutely clear that the economy is in a recovery mode”, he added.
While the fourth quarter GDP growth rate at 7.5 per cent was better than China’s 7.4 per cent, making India the fastest growing economy in the world, for the full fiscal it was a tad lower than the Chinese growth rate.
Jaitley further said that with improvement in agriculture and exports, India could achieve 9 per cent growth rate.
Jaitley said the services sector is moving towards a double digit growth rate while there is an upward movement in the manufacturing sector. “Therefore, it holds a good promise for Make in India programme”.
There is some improvement in capital formation and revenue collections, he said, adding they indicate that the Indian economy has a potential to realise its own strength.
The minister said 7 per cent plus manufacturing growth sends signals of economic revival.
“In my opinion, the full year growth numbers reflect that the economy is not at its full potential. Manufacturing and services sector indicate that we have a potential to grow at 8-9 per cent and even more than that,” Jaitley said.
He added however that agriculture and exports are the weaklings and if they show improvement the overall economic growth will be lot better.
He blamed poor monsoon for lower agriculture growth rate of 0.2 per cent in 2014-15.
The global slowdown, Jaitley said, has had its impact on Indian exports. “If global situation improves, Indian exports will automatically improve,” he said, adding that if agriculture and exports improve India will be able to achieve its short term growth target of 9 per cent and beyond.
Commenting on the GDP numbers, Finance Secretary Rajiv Mehrishi said the improvement in manufacturing sector growth shows that jobs are being created.
Chief Economic Advisor Arvind Subramanian said manufacturing and the services sector, which are within the government’s control, have done well; while those beyond its control – farm and exports, linked to monsoon and global economy respectively, have not done so well.
“Broadly this is a very encouraging news because directionally there is a substantial improvement in the basic price growth, it is increasing,” Subramanian said, adding that 2015-16 will be better than the previous fiscal.
He said the positive impact of last year’s slump in global oil prices will be fully realised in 2015-16.
“The real decline in oil prices happened towards the second half of last year and if you compare year-on-year, 2015-16 vs 2014-15, oil prices are going to be about 27-28 per cent lower. So the positive impact is going to be felt in 2015-16,” he said.
Subramanian said that the most recent reports on monsoon indicate it would be close to normal.
“I can say with confidence that agriculture growth next year will be higher than this year,” Mehrishi said.
Stating that the Indian economy was still recovering, Subramanian said: “We are not an economy that is at its potential.”