Economy Breaks 5-Quarter Slide, GDP Growth Recovers To 6.3% In Q2

GDP growth had slowed to a three-year low of 5.7 per cent in the April-June quarter, hit by destocking ahead of the July 1 rollout of GST and the lingering impact of demonetisation.

Economists expect India's GDP growth to accelerate further in coming quarters


  • GDP at 6.3% marks reversal in downtrend, said Arun Jaitley
  • Manufacturing sector led to recovery, said TCA Anant, Chief Statistician
  • Data comes as a shot in arm for government ahead of Gujarat polls
Economic growth rebounded in the three months ending in September, halting a five-quarter slide as businesses started to overcome teething troubles after the bumpy launch of a national sales tax GST. Gross domestic product or GDP grew 6.3 per cent in July-September, its fastest pace in three quarters, compared with 7.5 per cent a year earlier, government data showed today. It had declined to 5.7 per cent in the previous quarter.

TCA Anant, Chief Statistician of India, said the reversal after five quarters of decline "is very encouraging." The growth recovery was driven by the manufacturing sector, which grew at 7 per cent. But the agriculture sector recorded a sluggish growth rate of 1.7 per cent as compared to 4.1 per cent in the year-ago quarter.

Finance Minister Arun Jaitley remained optimistic of a higher growth rate in coming quarters. "The last five quarters had witnessed a downward trend. This marks the reversal of this trend. This also indicates that perhaps the impact of two very significant structural reforms - demonetisation and GST - is behind us and hopefully in coming quarters we can look for an upwards trajectory," he said.

Tushar Arora, senior economist at HDFC Bank, said: "The GDP number is exactly in line with our expectations. Upbeat corporate earnings results have been reflected in the manufacturing sector."

GDP growth had slowed to a three-year low of 5.7 per cent in the April-June quarter, hit by destocking ahead of the July 1 rollout of the GST regime and the lingering impact of demonetisation.

Thursday's data comes as a shot in the arm for BJP-led central government ahead of crucial assembly elections in Prime Minister Narendra Modi's home state Gujarat starting next week. The government has been attacked for what critics called a hasty GST launch in July. The tax, aimed at transforming the country's 29 states into a single market, hit millions of small businesses due to complex rules and technical glitches.

Commenting on the GDP numbers, Congress leader Manish Tewari said: "GDP captures the formal economy. It is the non-formal economy which has received a huge hit because of demonetisation and goods and services tax, which has been implemented in an extremely flawed manner."

Hitting back, BJP spokesperson Shaina NC said, "6.3 per cent is only the starting."

"India bouncing back against all odds, against demonetisation, GST, I think, this is just to suggest that yes, we are on the right track. For all those sceptics who want to believe that statistics is some kind of lie, I think, they need to wait and watch for the next three-four months," the BJP spokesperson said.