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New Delhi, Aug. 31: The economy expanded 5.5 per cent in the June quarter, breaking a declining trend in growth of the last five quarters.
Construction and financial services fared well, but manufacturing put up a weak show.
Finance minister P. Chidambaram expressed the need to boost investment in manufacturing as it decelerated to 0.2 per cent from 7.3 per cent in the same quarter in 2011-12.
“The decline of fixed investment is a source of concern for the government. It emphasises once again the need to take a quick decision to accelerate investment, especially remove all bottlenecks to investment in the manufacturing sector,” Chidambaram said.
Though the April-June growth of 5.5 per cent surpassed the 5.3 per cent of the previous quarter, it was considerably less than the 8 per cent growth reported in April-June 2011.
“After a continuous fall in the growth rate in successive quarters (starting in the fourth quarter of 2010-11), this is the first time when quarterly growth has exceeded the rate in the previous quarter,” the minister said.
“The good news is that the quarterly growth rate has gone up from 5.3 per cent in the last quarter (January-March) of the previous financial year to 5.5 per cent in the April-June quarter. Economic growth will improve in the second quarter. We did expect a rebound, so let us hope that in the second quarter and in the third, you will get the rebound,” Montek Singh Ahluwalia, deputy chairman of the Planning Commission, said.
C. Rangarajan, chairman of the Prime Minister’s Economic Advisory Council, expects a pickup in growth in the second half of the year. “I think the first-quarter GDP growth of 5.5 per cent is consistent with a growth rate of 6.7 per cent for the year as a whole that we had projected,” he said.
The data showed that farm output grew 2.9 per cent from 1.7 per cent in the previous quarter, while manufacturing expanded 0.2 per cent compared with a contraction of 0.3 per cent in the previous quarter.
Construction expanded a robust 10.9 per cent from 4.8 per cent in the January-March quarter, financial services grew 10.8 per cent in the first quarter of this fiscal from 10 per cent in the previous quarter.
However, growth in mining was 0.1 per cent compared with 4.3 per cent in the January-March quarter.
Industry bodies demanded a reduction in the interest rate to promote investment in manufacturing and revive sluggish growth.
“The GDP numbers leave no doubt about the criticality of the situation and we once again appeal for a co-ordinated monetary and fiscal intervention to address this deteriorating situation,” the CII said.
Ficci president R.V. Kanoria said, “I think with a little bit of confidence building, things can change dramatically. One or two big-ticket announcements will change the sentiment.”
The monetary policy review by the Reserve Bank next month would be closely watched now.
Core sector
The core sector grew 1.8 per cent in July, slower than an upwardly revised annual growth of 3.9 per cent in the previous month, data released today showed.
Natural gas and crude oil production contracted 13.5 per cent and 0.7 per cent, respectively, in July and fertiliser output shrank 2.2 per cent.
Steel and coal production slowed to 4.5 per cent and 2.1 per cent, respectively.
Cement, petroleum refinery and electricity output slowed to 3.8 per cent, 3.6 per cent and 2.2 per cent against 13 per cent, 3.7 per cent and 13 per cent, respectively.
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