March 19, 2018

India's economy recovers, posts growth of 7%

03 March 2018, 12:09 | Simon Arnold

India back as fastest-growing economy

India’s economic growth picked up sharply in October December quarter expanding by 7.2 per cent which indicates that economy has turnaround after demonetisation and GST

A pick-up in the country's manufacturing, construction and agriculture sectors accelerated India's third quarter 2017-18 GDP growth to 7.2 per cent from a rise of 6.5 per cent achieved in the second quarter, official data showed here on Wednesday.

Railway freight traffic growth has been fuelled by strong growth in coal and cement freight volumes, in addition to revision in freight rates. Corporates too could become risk averse. "GDP trends are consistent with the robust growth of the manufacturing Purchasing Manager's Index, the Index of Industrial Production, and consumer demand", the economist pointed out.

Urjit Patel, governor of the Reserve Bank of India (RBI), earlier this month said the economic recovery was at a nascent stage and called for a cautious approach. And that of July-September quarter of 2017-18) to 6.3 percent. The figure improved for the second straight quarter. China had recorded a growth of 6.8% in the December quarter. During the December quarter, the gross valued added (GVA) for manufacturing grew at 8.9% higher than 6.9% in the previous quarter.

Statistics publicised on Wednesday highlight that the Indian economy grew by 7.2%, compared to China's 6.8% rate of growth over the same period.

The construction sector recorded a growth of 6.8%, higher than 2.8% in previous quarter.

A Reuters poll of over 35 economists had projected GDP growth of 6.9% in the third quarter, while a Morgan Stanley research note forecast growth to accelerate to 7%. India's GDP data are not particularly dependable measures of growth. Pant also expressed concern over the decline in private consumption during the quarter under review.

Growth of 10% or more, Kant said, is "very doable".

The news of the ongoing recovery and especially the improvement in investment demand will be welcomed by the monetary policy committee, which had been anxious about growth.

Last week, he told industrialists that his government was determined to put the economy back on a higher growth trajectory, but it is still far from firing on all cylinders.

The fraud has cast a shadow over the workings of state-run lenders, already reeling from accumulated bad loans accumulated that are higher than those of banks in most major economies.

He has stepped up spending on infrastructure and welfare projects to boost growth ahead of national elections in 2019. India's fiscal year runs from April to March. This will likely be reinforced by lower portfolio flows into India, as well as a tightening of monetary policy in the US.

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