India's GDP Growth In First Quarter 2018-19 Reaches 8.2%, Highest In The Last Two Fiscal Years

India’s quarterly gross domestic product (GDP) grew at 8.2% for the 1^st quarter (Q1) of 2018-19 according to the data released by Central Statistic Office (CSO) on Friday. Union Finance Minister Arun Jaitley calling it a representation of the potential ‘New India’ tweeted the update.

India’s GDP for the first quarter this year growing at 8.2% in otherwise an environment of global turmoil represents the potential of New India.

— Arun Jaitley (@arunjaitley) August 31, 2018

He also added:

Reforms and fiscal prudence are serving us well. India is witnessing an expansion of the neo middle class.

— Arun Jaitley (@arunjaitley) August 31, 2018

According to The Indian Express, surpassing China’s growth figures, India has become the fastest growing economy in the world. This is the highest growth, India has attained since fiscal year 2016-17.

However, According to the Livemint, Last year, the first quarter observed an exponential dip in economic growth at 5.6 % as companies cut their stock before the GST roll out on 1st July.

Comparing the same quarter last year figures, the manufacturing sector grew at 13.5 5 % from -1.8% per cent; Agriculture sector registered fair growth figures at 5.3% from 3%, Construction also recovered by recording its growth figures at 8.7% from 1.8%.

However, service sector figures dipped to 7.3% from 9.5 % as well as the government expenditure which had supported the growth last year, receded to 9.9% from 13.5 % same quarter the previous year.

Reasons for higher growth

“The Indian economy should grow at a robust and steady state in full year, remaining the fastest economy in the world. Robust GDP performance in Q1 raises hope of exceeding estimates of 7.5 per cent for current fiscal,” Department of Economic Affairs Secretary, Subhash Chandra Garg told The Indian Express.

The high growth for this quarter in India is partly a result of the low base effect. Since quarterly GDP growth is calculated against the growth rate from a year back in the same quarter as the base, 5.6% growth in Q1 of the previous year provides for a low base. Hence the estimates for this year are higher.

After-effects of demonetization over?

A recent RBI report stated that 99.3% of demonetized currency is back in the system. Figures of the private consumption also surged to 8.6 % as mainly due to the increase in the consumer demand. Chairman of Maruti Suzuki, RC Bhargava told the Business Standard, that he believes, the actions taken in recent years including demonetisation, GST and digital payments have gradually brought down corruption as well as tax evasion. “These are essential for growth and what we see today is a result of all the reforms, including the ease of doing business,’’ he said.

Cautious Optimism

Key Industrialist of the country have praised the growth figures but have also affirmed ‘cautious optimism’ as more reforms are needed to bring consistent growth in the economy. Speaking to Business Standard, Rashesh Shah, president of the rival business chamber Federation of Indian Chambers of Commerce and Industry (Ficci), said, “While the latest growth numbers are quite robust, the volatility in oil prices and rupee value is exerting some pressure on industry members. These two factors have emerged as the critical macroeconomic concerns on the horizon.’’

Former Finance Minister and Congress Leader P Chidambaram tweeted

2016-17 17-18 18-19
8.1 5.6 8.2
7.6 6.3
6.8 7.0
6.1 7.7

Happy that the rate of growth has quickened, but look at the table once again. Q1 growth rate is based on the lowest base (5.6) in the last 8 quarters.

— P. Chidambaram (@PChidambaram_IN) August 31, 2018

Also Read: India Becomes World’s Sixth-Largest Economy In Terms Of GDP: Know What It Means