A closer look at the report on India’s economic growth suggests that not all is well, though Union Finance Minister (in-charge) Piyush Goyal asserted that nation’s economy is on the right track after India on Thursday retained the fastest growing major economy tag.
The key ‘agriculture, forestry and fishing’ sector has shown a growth rate of just 3.4 per cent as against previous year’s growth rate of 6.3 per cent. In other words, it has slipped by half.
According to a FirstPost report, only three sectors did better than last year – construction, trade, hotels, communication and broadcasting-related services and financial, real estate and professional services. Of these three, only construction showed a big jump, but that was thanks to a low base – from 1.3 per cent to 5.7 per cent.
Activity in India’s manufacturing sector grew at a weaker pace in May from the previous month, while inflationary pressures picked up again amid rising oil prices. This is another sign that an interest rate hike is around the corner.
A Reuters report said that the survey yet again showed a build-up of inflationary pressures that would no doubt be watched closely by policymakers.
This supports a Reuters poll of economists that had forecast the Reserve Bank of India (RBI) to hike rates in August, a dramatic turnaround from just a month ago when a survey predicted an increase only in the second half of 2019.
The Reuters report says a surge in oil prices over the past few months means India’s retail inflation has remained above the RBI’s target of 4 per cent for six months, increasing pressure on the central bank to act sooner than previously expected.