The Indian economy stayed the world's fastest growing major economy in the July-September quarter, expanding at 7.3%. But the outlook for the quarters ahead is clouded by the impact of the demonetisation drive. While farm sector, which expanded 3.3%, powered the Q2 growth, manufacturing slowed to 7.1% compared to a 9.1% expansion in the April-June quarter. Economists said demonetisation could see growth for the full year slowing down to 7%.
The economy grew an annual 7.3% in the July-September quarter, marginally faster than previous quarter's expansion of 7.1%. It grew 7.6% in the July-September 2015-16. The July-September quarter is the second quarter (Q2) of the country's fiscal year which starts in April.
Growth was powered by the farm sector, which grew an annual 3.3% during Q2 compared to 1.8% expansion in the previous quarter. Manufacturing sector growth slowed to 7.1% in July-September compared to 9.1% expansion in April-June quarter. The 7.3% GDP growth in the second quarter is higher than China's 6.7% growth. Economists said growth for the full year could slow to 7% due to impact of the government's decision to scrap some high value notes. The government has said that it expects the impact to last for about two quarters before growth comes back on track.There are varying estimates of how demonetisation will dent economic growth.
The finance ministry's chief economic adviser Arvind Subramanian said the government was analysing data against the backdrop of uncertainty in the second half of the fiscal year.
Asked about the impact of demonetisation in the quarters ahead, he said it will be subject to some amount of uncertainty.