India's economic growth surged to a five-quarter high of 7.2 per cent in the October-December quarter of the current fiscal, enabling the country to regain the status of the fastest growing economy in the world ahead of China after a year's gap. The Chinese economy recorded a 6.8 per cent growth rate during the same quarter. Official figures released on Wednesday showed that the improvement came on the back of a pick-up in the manufacturing, farm and services sectors which have overcome disruptions from the chaotic launch of the new goods and services tax (GST) regime in July.
The last time India had a faster growth rate was in the final three months of 2016. The Ministry of Statistics on Wednesday also revised its 2017-18 GDP growth forecast to 6.6 per cent from 6.5 per cent earlier and revised upward its GDP growth for the July-Sept quarter, to 6.5 per cent, from an earlier estimate of 6.3 per cent.
"Settling down of goods and services tax (GST) reforms will boost growth in the next fiscal year," said Anita Gandhi, a director at Arihant Capital Markets. ICRA economist Aditi Nayar said the pace of growth confirms that a recovery in Indian economy is underway. Based on the initial estimate of growth for Q3 2017-2018. Agriculture, manufacturing, construction and services, were the key drivers of the sequential uptick in growth in Q3, she added.
The gross valued added (GVA) for manufacturing in the quarter under review grew at 8.9 per cent higher than 6.9 per cent in the previous quarter. Similarly, the farm sector GVA grew at 4.1 per cent compared to 2.7 per cent in the previous quarter. The construction sector recorded a growth of 6.8 per cent, higher than 2.8 per cent in previous quarter. The services segment including financial services grew at rate of 6.7 per cent up from 6.4 per cent in previous quarter.
Most analysts do not expect a change in monetary policy as they still anticipate the RBI, which is balancing concern with inflation and support for growth, to hold interest rates at its next policy meeting on April 5. The GDP data could help Prime Minister Narendra Modi as he gears up for the next Lok Sabha elections with development and the creation of jobs as a major poll plank.
Last week, Modi told industrialists that his government, which has a "twin balance sheet" problem resulting from bad debt in banks and many businesses, was determined to put the economy back on a higher growth trajectory.M ODI is trying to accelerate growth through higher state spending, including Rs 2.1 lakh crore for recapitalisation of state banks, which are beset with mounting bad loans of nearly Rs 8.5 lakh crore.
He has stepped up spending on infrastructure and welfare projects to boost growth ahead of national elections in 2019. This has widened the fiscal deficit for the current fiscal year, ending in March, to 3.5 percent of GDP, instead of the figure of 3.2 percent projected earlier. The finance ministry said that the data indicate a broad-based and significant acceleration of real economic activity as projected in the Economic Survey. "Robust growth in manufacturing and significant acceleration in construction mark a turnaround in the countrys economic growth momentum,'' the ministry said in a statement.
Copyright©2021 Living Media India Limited. For reprint rights: Syndications Today