Robust second quarter GDP numbers suggest that the economy is in early stages of recovery, RBI Governor Raghuram Rajan said today, but retained his earlier growth projection for the current fiscal at 7.4 per cent. As per the Central Statistics Office (CSO), India’s GDP accelerated to 7.4 per cent in the July-September quarter, overtaking China as the world’s fastest growing major economy, on pick up in manufacturing, mining and services sectors. Announcing the Fifth Bi-monthly Monetary Policy Statement of the current fiscal, Rajan said provisional estimates of gross value added (GVA) at basic prices for Q2 of 2015-16 rose on the back of acceleration in industrial activity. “Other indicators suggest the economy is in the early stages of a recovery, though with some areas of continued weakness,” he said.
The GVA, a new concept introduced by CSO to measure the economic activity, also accelerated during the second quarter to 7.4 per cent, from 7.1 per cent in the April-June period. Rajan further said that while there are areas of robust growth in manufacturing such as capital goods and passenger cars, weak rural and external demand holds back stronger overall growth. Similarly, while prospects for a revival in service sector activity have been boosted by optimism on new business, pockets of lackluster activity such as construction weigh on the overall outlook. “The step-up in public capital spending and the easing stance of monetary policy provide the enabling environment for a revival in private investment demand, supported by easing input prices and improving conditions for doing business. The growth projection for 2015-16 has accordingly been kept unchanged at 7.4 per cent with a mild downside bias,” he said. Rajan also said the outlook for agriculture is subdued, in view of both rabi and kharif prospects being hit by monsoon vagaries.
