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Economic Growth Slows To 7% In First Quarter

Reflecting a muted performance, the GDP growth slowed to 7 percent in the April-June quarter, from 7.5 percent in the previous quarter, amid deceleration in farm, services and manufacturing sectors. A slower GDP growth, along with the slower pace of industrial production expansion, however, bolsters the case for a rate cut by the Reserve Bank. The Gross Value Added (GVA), a new concept introduced by CSO to measure the economic activity, also slipped during the first quarter to 7.1 percent, from 7.4 percent a year ago. The GDP grew at 7.5 percent in the January-March quarter while it was 6.7 percent in the April-June quarter last year, according to data from the Central Statistics Office (CSO).3-2 The nominal GDP and GVA at current market price showed a steep decline in the quarter under review. The nominal GDP slipped to 8.8 per cent in Q1 from 13.4 percent a year ago while the GVA growth rate nearly halved to 7.1 per cent from 14 per cent a year ago. The government towards the beginning of the fiscal has projected a growth rate of 8.1-8.5 percent in the current fiscal, which may be difficult to achieve. RBI, which has cut interest rate by 0.75 percent in three tranches since January, is scheduled to announce the next bi-monthly policy on September 29.3-3The data showed that the manufacturing sector GVA at constant prices (2011-12) rose 7.2 percent in the April-June quarter as against 8.4 per cent in the year-ago period. Similarly, the growth in the output of electricity, gas, water supply and other utility services decelerated sharply to 3.2 per cent as against 10.1 per cent a year earlier. The farm and allied sectors grew at 1.9 percent, down from 2.6 percent in the previous year. The output of mining and quarrying sector too slipped marginally to 4 percent, from 4.3 percent a year ago. Financial, real estate, and professional services growth shrank to 8.9 per cent as against 9.3 per cent a year earlier.

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