This growth rate means India remains the second-fastest growing major economy after China, which notched almost an 8% growth rate. More importantly, it's an improvement over the 5.8% notched up by India in the previous quarter and 5.3% recorded in the quarter before that.
If there's a shadow of cloud accompanying this brightening sky it's the uncertainty about whether the economy can maintain this momentum in the next quarter (and perhaps the one after that) when the agriculture sector got hit by a poor monsoon.
The growth figures are in line with projections. They tend to bear out that government stimulus measures for the economy have helped to create demand. The share of consumer spending in the economy shrunk to 55.6% in April-June from 58% a year ago, while the government's share rose to 9.9% from 9.6% on the back of stimulus spending.
The markets found nothing much to cheer in the latest data, with the BSE Sensex shedding 220 points at close (although after a sharp rise last week, which might indicate that there was profit-booking on Monday).
In contrast, top government officials were gung-ho. "I am glad that the worst may be over and we expect to see improved performance in subsequent quarters. It (the growth figure) is very good, it is consistent with what we were hoping for,'' Planning Commission deputy chairman Montek Singh Ahluwalia told reporters in Delhi.
In Mumbai, finance secretary Ashok Chawla said with encouraging first quarter growth, the government expects the economy to grow at 6.5% this fiscal. "We expect the growth rate to be 6.5% or above. Growth in the economy was very encouraging and it is expected to improve further going forward,'' he said.
Not everyone, however, was buying this argument. "We are expecting 5.8% for the entire fiscal, which means that growth in the second and third quarters should come down,'' agencies quoted HDFC Bank chief economist Abheek Barua as saying.
Electricity generation and mining output were the best performers as they grew 6.2% and 7.9%, respectively, in the first quarter of this fiscal against 2.7% and 4.6% a year ago. Financing, insurance, real estate and business services also expanded 8.1% against 6.9% from a year-ago period. Construction was slightly down at 7.1% from 8.4% and community services at 6.8% from 8.2%.
The services sector, which accounts for more than 57% of the economy's output, grew an annual 7.8% in the first quarter, against 10.2% in the year-ago period. Manufacturing output expanded 3.4% in the June quarter, while farm output was up 2.4%.
The worst-hit sectors were trade, hotels, transport & communication. Together, these sectors posted 8.1% growth in the first quarter this fiscal compared to 13% a year ago. Manufacturing was down to 3.4% against 5.5% and agriculture to 2.4% versus 3%.
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