Economic growth broadly in line with expectations: FM

Amid low overall growth, community, social and personal services expanded by a robust over 17%

The surprise was mainly due to the dismal figures for agriculture. The government’s advance estimates of growth for the full year, made a few weeks ago, had implied a growth rate of 2.4% for agriculture in the second half of the year.

If agriculture had grown at that rate in the December quarter, the GDP growth rate would have been 6.3%, higher than what the market was expecting.

Some analysts said the contraction in agriculture was the result of a statistical quirk and Abheek Barua, chief economist at HDFC Bank Ltd, says reports on the ground indicate farm growth is likely to bounce back in the next quarter.

Looking at the break-up of GDP growth by sectors, the y-o-y growth in GDP at factor cost is due to Growth in the Services Secor, including Construction.

New Delhi: Even as economic growth nosedived to 5.3% in the third quarter, the Finance Ministry on Friday said the rate is in line with expectations and the economy will expand close to 7% in the current fiscal.

“Broadly in line with our expectations.. will add up to close to 7% for the year as a whole...We are not very disappointed, we are not pessimistic about the number,” economic affairs secretary Ashok Chawla said.

He further said that the fourth-quarter contribution to GDP growth is normally better and the third quarter would be the worst for the entire fiscal.

On farm output, which registered negative growth in the third quarter, the finance ministry official said the rabi crop is expected to be better than normal.

“So all told our expectation is still that the fourth quarter is going to show robust growth, which will add up to close to 7% for the year as a whole,” he added.

He said public spending is already showing a substantial increase in terms of community, general services.

Amid low overall growth, community, social and personal services expanded by a robust over 17%.

“That (public spending) is taking the place of the decline in private sector spending (very quickly),” he said.

Chawla said the service tax cut by two percentage points should provide some kind of support and on the whole the service sector continues to be robust.