GDP to grow at 7.2% for FY19

GDP growth rate likely to be good, performance of different sector in good position

GDP to grow at 7.2% for FY19

GDP growth rate

  • The government has projected GDP growth for the full year 2018-19 to come in at 7.2%, which implies that growth in the second half of the year would slow significantly to 6.8% from the 7.6% clocked in the first half of the year, according to the first advance estimates of national income for 2018-19 released by the Ministry of Statistics.
  • This growth estimate for the entire year is slower than the Reserve Bank of India’s forecast of 7.4%.

Slow down

  • There is an indication of a slowdown in the second half, but not for such a slowdown.
  • Some of the slowdown seems to be in the services sector, particularly in those sectors with a larger weight such as transport and communications, and financial services. Otherwise, there doesn’t seem to be a reason for the slowdown.
  • A growth rate of 7-7.2% for the second half might have been more realistic.

Agriculture and Manufacturing sector

  • The advance estimate says that the growth in the agriculture sector would be 3.8% in 2018-19, faster than the 3.4% in the previous year.
  • The manufacturing sector is estimated to grow at 8.3% in 2018-19 compared with 5.7% in 2017-18.
  • However, this represents a dramatic slowdown in the manufacturing sector in the second half of the year, to 6.3% from 10.3% in the first half.

Construction set to grow

  • The construction sector, however, is expected to witness an acceleration in the second half of the year.
  • The transport and communications services sector is expected to grow at 6.9% in 2018-19, down from 8% in the previous year.
  • The financial services sector is set to grow at 6.8% in 2018-19 from 6.6% in 2017-18.
  • The final numbers would depend on three factors — how the oil prices pan out and hence, inflation, the government spending in the pre-election last quarter and the mood of the economy post conclusion of U.S.-China trade negotiations.

Point to remember

  • GDP growth rate
  • Performance of different sector