India’s economy grew by 7.3 per cent during 2014-15, the first financial year presided over by the Modi government, failing to overtake China as the world’s fastest growing major economy.

Also, capital formation continued to be lower at 28.7 per cent of GDP against 29.7 per cent during 2013-14. Gross fixed capital formation – a barometer for investments – slowed for the second straight year.

Improving significantly, however, the manufacturing sector grew by 7.1 per cent against the 2013-14 growth of 5.3 per cent. “The encouraging part is the growth in manufacturing, which would also mean that we are also creating jobs in our growth path,” Finance Secretary Rajeev Mehrishi told reporters after the data was released.

Figure revised

The Central Statistics Office on Friday revised downwards the growth figure from its earlier advance estimate of 7.4 per cent.

The International Monetary Fund has projected that India will outpace China during the current fiscal year.

The downward revision is in line with other indicators showing slowing output and sluggish corporate earnings.

Reserve Bank Governor Raghuram Rajan, who is due to announce a monetary policy review on Tuesday, had also cautioned on the possibility of a downward revision in the GDP growth.

Best yet to come for economy: CEA

Chief Economic Advisor Arvind Subramanian on Friday said the current financial year will be better than 2014-15 “by a margin greater than 2014-15 better than 2013-14.”

Dr Subramanian was reacting to the announcement of GDP growth of 7.3 per cent in 2014-15, the first year of the NDA regime. “This is very encouraging news….From the point of view of broader policy-making we are still a recovering economy…We are not an economy that is at potential; that has implications for what all actors, the government and everyone has to do to get India back to its growth potential,” Chief Dr Subramanian told reporters.

The prime drivers of the growth were the significantly stronger performance of ‘manufacturing’, ‘electricity, gas, water supply and other utility services’ and the ‘financial, real estate and professional services’.

Agriculture slumps

Almost all sectors of the economy picked up during the year. The exceptions were the sectors of ‘agriculture, forestry and fishing’, ‘mining and quarrying’ and ‘public administration defence and other services’ that’s linked to government spending.

In a statement, the Union Finance Ministry said one broad way of looking at the estimates released was that those sectors within control of policy manufacturing and services improved substantially while those dependent on factors beyond the policy control such as agriculture, which is dependent on weather, and exports, that are dependent on foreign demand, did less well.

Commenting on the growth figures, Confederation of Indian Industry (CII) Director General Chandrajit Banerjee said: “The figures reconfirm CII’s own assessment that the economy is showing signs of recovery which could gather pace in the next fiscal…the GDP figures for 2014-15 compare favourably with the previous year even while marginally undershooting the advance estimates of GDP released earlier this year.”