"We expect the last two rate hikes to play out on growth and inflation in the next two quarters and inflation to have only a moderate upside".
Assocham President Sandeep Jajodia said the first quarter GDP numbers augurs well for the entire fiscal Final Year 2018.
However in 2017-18, the data showed that the GDP growth was 5.6 per cent and 6.3 per cent in the first two quarters, that rose to 7 and 7.7 per cent in the third and fourth quarter of 2017-18.
The Indian government cited an expansion in manufacturing and construction as key factors in the sharp spike in growth. "But, Q1 growth rate is based on the lowest base (5.6) in the last 8 quarters", said Chidambaram. The government also revised the core sector growth figure for June to 7.6% and for May to 4.3%. The embattled currency has lost about 10 percent this year.
Finance secretary Hasmukh Adhia tweeted, "The GDP growth rate of 8.2% for the Q1 (April-June) of fiscal year 2018-19 indicates clearly that several structural reforms introduced such as GST have started giving rich dividends.The growth in manufacturing sector (13.5%) also indicates broad based recovery of demand".
To be sure, there is an element of base effect in the latest growth figures.
She added, "But (GDP growth rate) still this suggests that the turnaround is there and that there is an intrinsic resilience in the economy because despite zero macro-economic stimulus and external stresses, we are doing well". Strong acceleration in value addition was led by the farm sector and double-digit growth in the manufacturing sector. Agricultural, forestry and fishing sector recorded growth of 5.3 per cent, up from 3.0 per cent, mainly due to more than a 15 per cent increase in production of rice, coarse cereals and pulses during rabi reason.
From the expenditure side, the composition of GDP remained broadly the same during Q1 2019 and Q1 2018, with private consumption accounting for 55% of the total GDP.
Some economists attributed this to a base effect: economic growth had slipped to 5.6 per cent in the same period previous year, the lowest since the Modi government came to power in May 2014, after the shock of demonetisation. While impressive growth performance in agriculture and construction is a welcome trend given the high labour intensity of these sectors, services recording a lower than average growth is an important development, Sen added. Headwinds such as high oil prices, rising interest rates and speed bumps in global growth should play a role in slowing down the momentum. As tailwinds from a favourable base effect weaken from the next quarter onwards, GDP growth is expected to come down slightly, he said.