India’s economy grew at a seven-quarter high of 7.7 per cent in the fourth quarter of 2017-18, the latest data released by the Central Statistics Office (CSO) showed. As seen in Chart 1, gross domestic product (GDP) had previously grown by 7 per cent in Q3FY18, up from 5.6 per cent in Q1FY18, suggesting a steady pick-up in economic activity over the past year.
Gross value added (GVA), which excludes product taxes and subsides, grew by 7.6 per cent in Q4FY18. But, as seen in Chart 2, excluding public administration, defence and other services, which largely connotes government spending, GVA growth slowed to 6.7 per cent in Q4.
Over the last fiscal year, the uptick in construction activity was the biggest surprise.
The sector grew at 5.7 per cent in FY18, up from 1.3 per cent in FY17. As seen in Chart 3, trade, hotels, transport and communication as well as financial, real estate and professional services saw a minor uptick in FY18, while agriculture and mining registered sharp declines.
A quarterly break-up of economic activity shows that construction picked up steam in Q4FY18, growing 11.5 per cent, up from 6.6 per cent in Q3. As seen in Chart 4, manufacturing activity also gained momentum, growing 9.1 per cent in Q4FY18, up from 8.5 per cent in the previous quarter.
On the expenditure side, both private and government consumption expenditure moderated in FY18, compared to FY17 (Chart 5), though the latter accelerated sharply in Q4FY18.
Surprisingly, despite capital spending by both Central and state governments slowing in the fourth quarter, gross fixed capital formation, which connotes investment activity in the economy, grew at a staggering 14.4 per cent in Q4FY18, up from 9.1 per cent in Q3 (Chart 6).