Even as it keeps world’s fastest growing economy tag, India’s GDP slumps to 7.1% in Q2

New Delhi: Bogged down by a depreciating rupee and rising fuel prices, India's economy registered a gross domestic product (GDP) growth rate of 7.1 percent in the second quarter of the current fiscal, even as it continued to keep the tag of the fastest growing economy in the world. The previous quarter had posted a growth of 8.2 percent and the rate of economic growth in the same quarter last year had been 6.3 percent.

Apart from rupee depreciation and crude oil prices, an uneven and sub-par monsoon, flooding in some areas amid a late withdrawal of the monsoon rains, and instances of crop damage and pest attacks hurt the farm sector and pulled the growth figures down.

'A weakening trend could be worrying'

Even though the rate of economic growth in Q2 looks better when compared to the same period last year, it marks a slump over the last quarter of the current financial year and experts have warned that this downward trajectory could be a worrying sign. The country needs a growth rate of over 8 percent to generate enough jobs for the more than 12 million young Indians entering the labour force each year and the issue of jobs assumes significance especially because the country is inching closer to the 2019 General Elections.

While there was a consensus that the economic growth in the second quarter would not be as high as 8.2 per cent recorded in the April-June quarter, estimates had varied from 7.2 per cent to 7.6 per cent.

Market cautious before release of GDP data

Earlier in the day, the equity markets had maintained a cautious stance in anticipation of the release of GDP growth numbers. Benchmark indices S&P BSE Sensex rose 24 points, or 0.1 percent over previous close, to end at 36,194, and the Nifty50 settled at 10,877, up 18 points, or 0.2 percent, higher than its previous close.

The backdrop

The figures come days after the Central Statistics Office announced revised growth estimates that made the Modi administration's record look better than the previous Congress-led United Progressive Alliance governments.

According to the new set of data, India's GDP grew at an average 6.7 per cent during the nine years of the UPA regime (2005-06 to 2013-14). By comparison, the average growth rate under the current National Democratic Alliance government stands at 7.3 percent. GDP growth for all years prior to 2012-13 has been revised downwards.