Services grow 7.36%, manufacturing slows

Services, particularly the construction and financial sectors, provided a cushion to India’s gross domestic product (GDP) in the first quarter of this fiscal against the slowdown in manufacturing and mining. Manufacturing, however, had its impact on the transport segment of services, whose growth, together with trade, hotels and communication, fell to 4 per cent in April-June, 2012-13, the lowest in the last 12 years. Growth in this segment was 13.8 per cent in the first quarter of last fiscal. The overall growth in services, including construction, was 7.36 per cent for the first quarter.

Economists explained manufacturing required transport to carry goods produced. Manufacturing growth was down to 0.1 per cent, though slightly higher than contraction of 0.2 per cent in the first quarter of the last fiscal. Trade, hotels, transport & communication segments comprised 28 per cent of GDP.

 

Despite that, GDP did not fall below 5.3 per cent, as recorded in the previous quarter (Q4 of 2011-12), because construction rose 10.9 per cent, while financing, insurance, real estate and business services rose 10.8 per cent. The respective figures stood at 3.5 per cent and 9.4 per cent in the corresponding period of last fiscal.

As government consumption expenditure rose nine per cent in the first quarter of this fiscal, higher than 4.89 per cent and 4.3 per cent in the first and fourth quarters of last year, its impact was seen on community, social and personal services. This sector grew 7.9 per cent against 3.2 per cent in the first quarter of last fiscal.

The manufacturing sector is hit hard by rising interest rates and low demand in the economy, economists said. It would not be possible to revive it unless policy measures are taken and mining improves. Mining slightly rose by 0.1 per cent against the contraction of 0.2 per cent in the first quarter of last fiscal.

Slow uptick in mining may also affect the electricity sector that grew 6.3 per cent in the first quarter of this fiscal, though it is lower than 8 per cent in a year ago.

Low demand in the economy is reflected in private final consumption expenditure that slowed down to 29 quarter-low of 3.97 per cent.