The impact of demonetisation and the Goods and Services Tax was now over and hopefully in coming quarters economic growth will be on an upward trajectory, Finance Minister Arun Jaitley said on Thursday after government data showed that the the growth rate of the Gross Domestic Product rose to 6.3% for the second quarter of the 2017-’18 financial year.
The government’s reforms measures to boost economic growth were working, the finance minister claimed, adding that the evidence was in the manufacturing sector’s robust growth of 7% and the services industry’s growth rate of 7.1%.
He said that the growth of the manufacturing sector was the most significant aspect of “this quarter’s positive result”. This, he added, had helped reverse the downward trend seen in the last five quarters.
Icra attributes rise to growth in industrial sector
Reacting to the second-quarter growth data, independent credit rating agency Icra said that GDP growth had been “mildly weaker than expected”. It said that the rise in the GDP growth rate from 5.7% to 6.3% could be attributed to the growth of the industrial sector.
“The improvement in the growth of manufacturing and mining [sectors] was the key factor underpinning the recovery in the second quarter of the 2017-’18 financial year,” a statement by the agency’s Principal Economist Aditi Nayar said.
The construction sector grew the slowest in the July-September quarter due to weak consumer sentiment, which was a result of demonetisation and the rollout of the Goods and Services Tax, the agency said. The credit rating agency added that a slowdown in central government spending and the unfavourable kharif crop output caused a reduction in the services and agricultural sector growth rates.