The first Advance Estimates of national income, released in January, projected that economic growth will recover steadily in the second half of 2017-18. The second Advance Estimates released by the Ministry of Statistics and Programme Implementation last week showed that economic growth did actually cross the psychologically significant 7 per cent-mark in the third quarter of 2017-18. As a result, estimates for both gross domestic product and gross value added have been revised upwards, as shown in Chart 1. Chart 2 shows the salutary impact Q3 has had after Q1 growth slumped below the 6 per cent-mark.
Chart 3 provides the sectoral break-up of growth over FY17 and FY18. Overall, compared to FY17, growth in FY18 has been driven by trade, financial services and public administration. While these were the outstanding performers, equally heartening was the rebound in the manufacturing sector. Manufacturing growth in FY18 may have fallen short of the growth in FY17, yet, as shown in Chart 4, there have been a sharp improvement over the first quarter, when there was an actual contraction.
The recovery is being widely attributed to the disruptive impacts of the goods and services tax lessening over time. Chart 5 shows the quarterly break-up of growth in trade and financial services sectors.
If one looks at the GDP accounting from the expenditure side, it is clear, as shown in Chart 6, that private final consumption expenditure (PFCE) is still subdued. However, PFCE has improved between the first and second Advance Estimates and it has also improved in 2017-18 compared to 2016-17. However, the most important information carried in the second Advance Estimates pertained to the sharp improvement in the rate of growth of new investments, measured by gross fixed capital formation, as shown in Chart 7. *Q4 data calculated based on existing estimates, Source: Ministry of Statistics and Programme Implementation