It was the "hand of government" that boosted GDP growth to an exemplary 7.7 per cent during the quarter ended March as exports and private consumption disappointed, an HSBC report said. Clocking its fastest rate of growth in seven quarters, the Indian economy grew at 6.7 per cent during the financial year 2017-18, according to government data released earlier this week.
The report by the global financial servies major cited four key drivers for the rise in growth print -- core GVA (Gross Value Added), the public spending component of GVA, construction, and rise in central and state government fiscal deficits.
As per the report, core GVA (GVA excluding public services and agriculture), which is a rough proxy for private sector growth, moderated slightly in the March quarter to 7.2 per cent versus 7.4 per cent last quarter and 4.1 per cent in the same quarter last year.
"The GDP print reinforces our view that much of the current uptick in growth is led by the government's push to construction and consumption," the HSBC report said.
On one hand, while manufacturing and agriculture growth rose, exports and private consumption disappointed, it added.
"Even though global demand has been strong, India's export growth fell across every metric. Net exports shaved off 1.5 ppt from the growth number," it added.
Besides, central government fiscal deficit for FY18 rose to 3.5 per cent, versus a budget estimate of 3.3 per cent and this has growth dividends, the report noted. According to government data, fiscal deficit for last fiscal settled at Rs 5.92 lakh crore which amounts to 3.52 per cent of the total GDP.
India retained the tag of the fastest growing major economy in the March quarter on robust performance by manufacturing and service sectors as well as good farm output. The GDP numbers showed that all core sectors clocked significant growth during Q4 of FY18, in comparison to the quarter before. This spurt in GDP growth also opens up the possibility of Reserve Bank of India considering a rate hike during its upcoming monetary policy meet.