New Delhi– Breaking a five-quarters’ slump, a rise in the manufacturing sector’s output pushed India’s growth rate higher to 6.3 per cent during the second quarter of 2017-18, official data showed on Thursday, even as industry hailed the signs of economic recovery and the government said the twin impact of demonetisation and GST “are behind us”.

On a sequential basis, India’s GDP growth for Q2 of the current fiscal went up to 6.3 per cent, from 5.7 per cent reported during the first quarter of 2017-18.

According to data from the Central Statistics Office (CSO), the GDP for Q2 stood at Rs 31.66 lakh crore, or a growth of 6.3 per cent. India’s GDP had grown at 7.2 per cent in the corresponding quarter last year.

On gross value added (GVA) basis, which includes taxes but excludes subsidies, India had registered a growth of 6.1 per cent during the quarter in consideration over the corresponding quarter last year, the CSO said. The GVA during the first quarter ending June came in at a lower 5.6 per cent.

“The economic activities which registered growth of over 6 per cent in Q2 of 2017-18 over Q2 of 2016-17 are ‘manufacturing’, ‘electricity, gas, water supply & other utility services’ and ‘trade, hotels, transport & communication and services related to broadcasting’,” said the document on the estimates of GDP for the Q2 of 2017-18.

“The growth in the ‘agriculture, forestry and fishing’, ‘mining and quarrying’, ‘construction’, ‘financial, insurance, real estate and professional services’ and ‘public administration, defence and other services’ is estimated to be 1.7 per cent, 5.5 per cent, 2.6 per cent, 5.7 per cent and 6 per cent respectively, during this period,” it said.

Briefing reporters following the release of the data, Chief Statistician T.C.A. Anant said the reversal of the declining growth trend earlier is an encouraging signal.

“The latest GDP decline started in the fourth quarter of 2015-16. So the Q2 GDP coming in at 6.3 per cent, as compared to 7.2 per cent last year, is quite encouraging at this point,” he said.

Anant said the reversal of the previous declining trend was mainly on account of a jump in manufacturing activity during the second quarter, with GVA growing at 7 per cent, as compared to the measly growth of 1.2 per cent in the previous quarter.

Agriculture GDP during the quarter in question at 1.7 per cent registered lower growth.

“Agriculture in the quarter was held up by the non-crop segments, because crop production has done just a little bit poorly,” Anant said.

“Last year was very good because of the monsoons, although this year crop production is better than the five-year average,” he added.

The Chief Statistician also said the implementation of the Goods and Services Tax (GST) from July had introduced a number of uncertainties in the GVA calculations for the second quarter, and the revised estimates could show up higher indirect tax collections once the final GST figures come in.

“GST has brought in a number of uncertainties because of tax for the period not being paid on time. In fact, the government has extended the deadlines for filing GST returns, so the tax data for the relevant period is still coming in,” he said.

Commenting on the GDP numbers, Finance Minister Arun Jaitley told reporters here that they showed that the impact of the two major structural reforms – demonetisation and GST – “are behind us”.

“The most significant aspect of the quarter’s reversal in GDP decline is that this has been impacted by growth in manufacturing.

“Also the figure for fixed capital formation means that actually investments are moving up,” he added.

India Inc. said the rise in the GDP numbers showed signs of economic recovery.

“Growth numbers are in sync with the expectations and re-affirm that signs of recovery are in sight,” said Ficci President Pankaj Patel.

He said that the Reserve Bank’s upcoming monetary policy review next week “will be a perfect timing to give another shot to boost the sentiment”.

Industry chamber CII Director General Chandrajit Banerjee described it as a “great confidence booster”.

“What is encouraging is that manufacturing has emerged as a key driver of growth indicating that firms have started restocking and recovery is taking shape. Gross fixed capital formation has also picked up from last year’s lacklustre pace,” he said.

According to Anis Chakravarty, Lead Economist, Deloitte India, the latest set of numbers showed improved performance of manufacturing that could have possibly been affected by the GST implementation.

“High frequency indicators such as auto sales suggest that demand has recovered since then and manufacturing could see better numbers in the quarters ahead,” he said.