India yet to overtake China GDP, but we’ll beat them soon: Arun Jaitley

31 May 2015 | Author: | No comments yet »

Arun Jaitley: India has potential to achieve double digit growth.

The downturn in the US economy was due in part to a swelling trade deficit caused by a strong dollar and plunging investment in oil exploration following the drop in fuel prices.In a reference to a recent report of the Central Statistics Office, he said that the nation’s manufacturing sector has posted a growth rate of over seven per cent growth, which to his mind was indicative of a rejuvenation of the industrial sector. About 30 days after each calendar quarter the Bureau of Economic Analysis (BEA) releases its report on how the economy performed during the previous quarter.

Photo: AFP Gross domestic product shrank at a 0.7% annualized rate in the first quarter, revised from a previously reported 0.2% gain, according to commerce department figures issued on Friday in Washington. Emphasizing that the NDA Government was both transparent and decisive in policies, Jaitley said relations between the Centre and the states have improved and the global image of India has brightened. Jaitley also said that three legislations had been brought after the constitutional amendment on Goods and Services Tax (GST) to ensure that India achieves the goal of becoming one market with a uniform rate of tax. During his visit to Madhya Pradesh, Jaitley inaugurated the New Bank Note Paper Line unit of 6000 metric ton capacity at Security Paper Mill in Hoshangabad, and flagged off the first consignment of one thousand rupee bank notes made indigenously to the Currency Note Press Nasik. Last quarter’s contraction was smaller than the 2.1% fall at the start of 2014, when a prolonged patch of bitterly cold temperatures held back the economy.

The various research results indicate first-quarter growth has underperformed the rest of the year by about 1.6 percentage points to 1.7 percentage points on average. Clearly, the extended run up in the stock market, which long-term requires a healthy economy for strong profits, is in the early to mid-stage of a bubble. Unless and until a new regime is installed in Washington, one which is more business friendly and less concerned with remaining in power, I fear the economy will continue to suffer. While poor weather and merchandise delays due to a labor dispute at West Coast ports were temporary restraints, the damage caused by the plunge in fuel prices and stronger dollar may be longer-lasting. A widening trade deficit subtracted 1.9 percentage points from growth, the most since 1985, compared with the previously estimated drag of 1.25 points, according to the commerce department’s data.

Revisions to incomes showed wages and salaries rose even more than last reported and the saving rate was the highest since the end of 2012, indicating households can unleash some pent-up demand. Still, it marked the weakest reading in six months. “The index is still quite high,” Richard Curtin, director of the Michigan Survey of Consumers, said on a conference call after the figures were released. During the latter half of the month, “I expected confidence to inch upward and I still think that is likely over the months ahead.” The economy is poised to pick up this quarter. A Bloomberg survey of economists in May predicted growth will accelerate to a 2.7% pace in April through June, with household consumption expanding 3.2%.

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