The Indian economy grew marginally stronger than-expected in the April-June quarter on the back of robust farm sector growth but economists said the Reserve Bank of India is unlikely to ease monetary policy soon as its attention is focused on taming price pressures.
Data released by the Central Statistics Office showed the economy grew 5.5 % in Q1 of 2012-13, compared to 5.3% in the January-March quarter. It rose 8% in the April-June quarter of 2011-12.
The farm sector posted a robust performance, rising 2.9% in April-June quarter compared to 3.7% expansion in the previous-year ago period. The manufacturing sector continued to pose a concern as it remained flat at 0.2% compared to 7.3% in the year earlier period.
The Indian economy, Asia’s third-largest, has slowed in the past few quarters due to a series of factors which include high interest rates, stalled policies and economic reforms, sluggish industrial growth, slowing global economy and gloomy business confidence.
Several economists and research units have downgraded their growth estimates for 2012-13 and some expect growth to be below 6%, while policymakers say it would be a shade better than the previous year’s 6.5% expansion. The services sector, which accounts for nearly 60% of GDP, grew 6.9% in the April-June quarter, slower than 7.9% growth in the previous quarter and 10.2% in the year earlier period.
FM P Chidambaram said the decline in the growth of fixed investment was a concern and called for quick decisions to step up investments. “Of course, the decline in the growth of fixed investment (0.7% in Q1 of 2012-13 as against 14.7% in Q1 of 2011-12) is a source of concern to government. It emphasizes once again the need to take quick decisions to accelerate investments, especially removing all bottlenecks to investments in the manufacturing sector,” Chidambaram said in a statement.
Economists said beyond the slight pick-up in growth, there was nothing much to cheer about as the data still showed that the economy was under stress.
The construction sector was a surprise among the pack registering a growth of 10.9% year-on-year and posted the strongest expansion since the September quarter of 2007. Some economists said they expect the RBI to ease rates against the backdrop of expectations of sub-par growth but the timing would depend on how inflation pans out in the months ahead.
Weighed down by negative growth in crude oil, natural gas and fertilizer, the eight core sector industries grew at a rate of 1.8% in July, the lowest in the last nine months. The growth in key infrastructure industries was 8.2% in the same month last year. The previous lowest expansion was 0.4% in October last year. For the April-July period, the growth has slowed to 3.2% from 6% in the same period last year.