The disaggregated data shows that the agricultural sector grew at 2 per cent, as the impact of the heatwaves continues to be felt. The farm sector had grown at 1.4 per cent last year.
The Indian economy grew at a five quarter-low of 6.7 per cent in the first quarter (April-June) of the ongoing financial year. Growth has come in lower than the central bank’s expectations of 7.1 per cent. This moderation in growth can be attributed to several factors — subdued government spending, sluggish growth of the farm sector and parts of the services economy. However, there is the possibility of some of these segments bouncing back over the next few quarters, providing a fillip to the broader economy.
The disaggregated data shows that the agricultural sector grew at 2 per cent, as the impact of the heatwaves continues to be felt. The farm sector had grown at 1.4 per cent last year. This is lower than its long-term average. However, a good monsoon should help spur the sector’s performance, which bodes well for rural consumption. An increase in output could also have a moderating influence on prices. The manufacturing sector grew at 7 per cent, down from 8.9 per cent in the fourth quarter of the last year. Data on industrial production had earlier shown that the segment grew at 3.8 per cent in the April-June quarter. According to the RBI, however, aggregate sales of listed private non-financial companies rose by 6.9 per cent, while net profits increased by 14.2 per cent. Construction continues to exhibit strong momentum. The sector grew at 10.5 per cent in the first quarter, up from 8.7 per cent in the fourth quarter of the last financial year. Steel production has been healthy, though cement output has moderated. Within the services sector, the financial, real estate and professional services segment grew at a relatively faster pace than trade, hotels, transport and communication.
On the expenditure side, after sluggish growth for several quarters, private consumption has picked up pace. Spending grew at 7.4 per cent even as the central bank’s survey points towards a dip in consumer sentiments in urban areas. Data on industrial production had shown that consumer durables grew at 10.4 per cent in the first quarter, while the non-durables segment registered a minor decline. Investment activity has also held up, growing at 7.5 per cent. But, considering that, during this quarter, central government capital expenditure declined by 35 per cent, it would suggest that the momentum has been driven by households (residential housing) and/or private firms. Overall government spending had also been subdued due to the general elections — the Centre’s expenditure was, in fact, 7.7 per cent lower than last year in the first quarter. This suggests a pick-up in government spending in the subsequent quarters providing a boost to economic activities.
