Surprising economic growth that proved critics wrong

India's 8.2 per cent economic growth (GDP) in the second quarter, surpassing the Reserve Bank's estimate, deserves more limelight and laurels. This is the highest economic growth rate in the last six quarters. The Reserve Bank's estimate was just seven per cent. Other economic agencies had also predicted only 7 to 7.5 per cent. The GDP growth even proved wrong the economists' predictions of mediocre performance, considering the heavy tariff imposed by US.

The growth rate increased to 8.2 per cent in the second quarter from 7.8 per cent in the first quarter. The high economic growth was achieved due to the boom in the manufacturing, construction and services sectors.

The National Statistical Office data shows that the manufacturing sector grew by 9.1 per cent, the construction sector by 7.2 per cent and the services sector by 10.2 per cent. The new data shows that the 50 per cent tariff imposed by the United States on products from India did not affect growth. At a time when the world's superpowers are caught in stagnation, India is cruising to become the fastest-growing economy. In the first six months of the current financial year, India's GDP increased to 96.52 lakh crore rupees from 89.35 lakh crore rupees in the previous year. Even the decline in agricultural production did not hinder India's economic growth.

The GST rate cut reform led to a surge in factory production, enabling growth beyond expectations. In the second quarter of 2024-25, production growth increased to 9.1 per cent, up from 2.2 per cent. If agricultural production had not suffered a setback due to factors including climate change, India's economic growth would have set a record in the second quarter.

Economic decisions, including tariffs, by large countries often disrupt the economic shape of other countries. Contrary to this notion, the indications given by the new growth rates prove beyond doubt that India is now nurturing a strong economic base.

The 'Atmanirbhar Bharat' scheme announced by Prime Minister Narendra Modi is playing an important role in accelerating India's growth. For three-quarters of a century after independence, India followed an economic policy of never reducing taxes, whether on any product or on services in other sectors. India has now adopted a new economic policy of increasing revenue by boosting production rather than raising taxes. The revolutionary decision to significantly reduce GST rates is part of this. In the context of the country's high growth, the possibility of the Reserve Bank's Monetary Policy Committee meeting next week to cut interest rates again cannot be ruled out. If that happens, we can expect a significant surge in manufacturing sector growth.