The Central Statistics Office (CSO) recently released the growth estimates for the July-September quarter.
How is the growth scenario?
Growth - GDP growth weakened to 7.1%, from the robust 8.2% in April-June.
It comes as a result of rising oil prices combined with a weakening rupee that hampered demand.
Gross value added (GVA) data show five of the eight sectors reflecting the slowdown from the first quarter.
Only utility services, public administration, defence and other services, trade, hotel, transport, communication and broadcasting services showed growth.
Agriculture - Worryingly, GVA growth in agriculture, forestry and fishing eased to 3.8%, from 5.3% three months earlier.
It's because foodgrain output in the kharif season went up a mere 0.6%.
Besides, there is distress in the farm sector, below-normal monsoon rains and a shortfall of over 8% in rabi sowing till November.
Rural - Given the above, the outlook for rural demand remains challenging at least for the next couple of quarters.
This demand weakness in the hinterland is also evident in the consumption spending data.
Notably, growth in private final consumption expenditure slowed down to 7%, compared to 8.6% in the first quarter.
Manufacturing - The manufacturing sector recorded a 7.4% expansion.
However, it also poses cause for concern as the momentum almost halved from the June quarter’s 13.5%.
It has slipped back nearer to the year-earlier level of 7.1%.
Index of Industrial Production data reveal that manufacturing output growth remained stuck at 4.6% through August-September.
This, along with the weakness in car and two-wheeler sales, suggests that an acceleration may take some time.
How is the investment scenario?
Gross fixed capital formation (GFCF), a key metric for investment demand, showed a positive trend.
It expanded by a robust 12.5%, building on the first quarter’s 10% increase, and constituted 32.3% of GDP.
With non-food bank credit also showing signs of a recovery, there is an apparent prospect of an investment revival.
An RBI research paper notes that improvement in investment activity is being driven by cyclical factors and may last up to 2022-23.
It, however, points to risks to the investment outlook and flags the gross fiscal deficit as a key pressure point.
As, borrowing by the government invariably crowds out investment demand.
Here, the latest expenditure and receipts figures released by the Controller-General of Accounts are not reassuring.
The fiscal deficit crossed the budget estimate for the full year in just the first seven months.
It raises the chances that the Centre would miss its target of limiting the deficit to 3.3% of GDP.
Given the multiple uncertainties looming on the global trade and growth horizon, India’s economy will have to be at its best to keep the momentum from sliding.
