At 6.1%, GDP Growth Trails Forecast For First Three Months Of The Year

India's GDP or gross domestic product grew at 6.1 per cent in the January-March quarter, slowing from a provisional 7.0 per cent in the previous quarter, government data showed today. Analysts had forecast a growth of 7.1 per cent in Q4 and several said the slowdown could be due to a lingering effect of the notes ban. For the full year, growth has come in at 7.1 per cent, in line with the official estimate. The economy grew a revised 8 per cent in 2015-16.

"It suggests spill-over slowdown from the December quarter's note ban, when growth had proved to be surprisingly resilient," said Radhika Rao, group economist at DBS.

Shubhada Rao, chief economist at Yes Bank, said "The lower-than-anticipated fourth quarter GDP number reflects the lingering impact of demonetisation. However, incremental data in April shows that growth impulse is improving and economic activity is picking up on the ground." Another economist, A Prasanna of ICICI Securities Primary Dealership, said, "The data for Q4 is quite shocking."

In the March quarter, the agriculture, forestry and fishing sectors grew at 5.2 per cent; mining and quarrying at 6.4 per cent; manufacturing at 5.3 per cent; electricity, gas, water supply and other utility services at 6.1 per cent; trade, hotels, transport and communication at 6.5 per cent; financial, real estate and professional services at 2.2 per cent; and public administration, defence and other services at 17 per cent.

However, the construction sector shrank 3.7 per cent.

Commenting on the GDP numbers, Anjali Verma, economist at PhillipCapital India, said, "It looks pretty tepid...Manufacturing is pretty tepid, construction continues to remain very weak. Going ahead, I think one key factor will be the banking sector. That's dragging growth substantially."

Economists say that the Reserve Bank of India could reassess its monetary policy at its review early next month given that the economic growth has come in below expectations.

Gaurav Dua, head of research at domestic brokerage Sharekhan, said, "The current GDP rate is much closer to ground reality, and it is likely to soften the Reserve Bank's hawkish stance on growth. Hence, I do not expect a rate hike by the RBI anytime soon."

Another set of macroeconomic data released today showed annual infrastructure output growth slowed to a three-month low of 2.5 per cent in April, dragged down by a slowdown in refinery output and a contraction in coal production. The output grew a revised 5.3 per cent year-on-year in March.

Annual growth in refinery production slowed down to 0.2 per cent last month from 2.0 per cent in March. Coal production fell 3.8 per cent on year from a 10.8 per cent growth in March.