Drought fears cloud GDP recovery in Q1

New Delhi: The worst seems to be over for the Indian economy, with the government’s statistics office announcing on Monday that the economy had grown by 6.1% in the first quarter of the current fiscal year, the best growth in the last three quarters. But analysts warned that the drought-like situation in the country may prove to be a dampener in the coming quarters.

Weak consumer spending and anaemic investment spending continue to be major concerns, though their drag on economic growth was more than offset by a big spurt in government spending through the two fiscal stimulus packages in December and February.

The country’s gross domestic product (GDP) at the end of the first quarter of the current fiscal year was Rs8.31 trillion, compared with Rs7.83 trillion in the same period of 2008-09, raising expectations that the economy could meet the anticipated growth rate of 6%-plus for the year.

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Data released by the Central Statistical Organisation on Monday indicated that the economy had a marginal recovery when compared with the preceding quarters. The GDP growth rate decelerated from 7.7% in the second quarter ended September to 5.8% in quarter ended December and then bottomed out at the same level in the fourth quarter ended March of 2008-09.

During the April-June quarter of 2009-10, while the farm sector grew 2.4%, industry and services sectors grew at 4.8% and 7.8%, respectively. While a higher growth in mining and electricity sectors led to strong growth in the industry sector, growth in services was led by banking and finance.

Consumption growth slowed to 2.8% in the quarter compared with 6.1% in the fourth quarter of 2008-09 largely due to a slump in the growth of private consumption, which fell to a seven-year low at 1.6% even as government consumption was up at 10.2%. Investment growth declined, marking the lowest growth since 2001-02 at 4.5%, down from the sustained double-digit growth in the previous quarters. Though the first quarter growth rate is lower compared with the same quarter of the previous year when the economy grew at 7.8%, it signals a turnaround and bottoming out of the economy as in the previous two quarters of fiscal 2008-09, the economy grew at 5.8%.