Weak GDP may add fuel to Opposition fire
Fed's action to boost economy will be a 'close call'

Economy Aug 31, 2012

GDP grows 5.5%; RBI focus on inflation to stay

By Firstbiz Staff

India's GDP grew a higher-than-expected 5.5 percent on year during April-June, compared with a 5.3 percent growth in January-March, allowing the central bank to continue its focus on taming inflation and holding policy rate.

On an average, estimates for the growth had ranged between below 5 percent to 5.3 percent. The slight improvement in GDP is likely to aid the RBI's stance on rate cut. The central bank has reiterated that the government's fiscal policy action should precede any rate cut move.

Agriculture, forestry and fishing grew 2.9 percent. Reuters

However, a higher construction sector growth is likely to be the only saving grace for the sagging economy, which has witnessed a near-stalling of industrial activity.

The growth in agriculture has been impacted by a deficient rain in June.

According to the government's press release, the economic activities which registered significant in April-June of 2012-13 over the year-ago period are construction at 10.9 percent (3.5 percent a year ago), financing, insurance, real estate and business services at 10.8 percent and community, social and personal services at 7.9 percent.

Agriculture, forestry and fishing grew 2.9 percent (3.7 percent), mining and quarrying 0.1 percent, and manufacturing 0.2 percent (7.3 percent a year ago).

The growth in electricity, gas and water supply was 6.3 percent.

The industrial sector growth was 3.6 percent as against 5.6 percent a year ago.

The growth in the electricity sector was 6.3 percent compared with 8 percent.

Terming the GDP growth reasonable, Prime Minister's Economic Advisory Council Chairman C Rangarajan said the next RBI move will depend on inflation, CNBC-TV18 reported. He expected an improvement in growth from the third or fourth quarter.

He said the 5.5 percent figure is consistent with the 6.7 percent GDP growth estiamte for the full year.

Experts on CNBC-TV18 said the data did not change their view on the economy and expected the central bank to continue to hold on to the policy rates.

See the full press release on GDP figurehere.

by Firstbiz Staff

Related Stories.