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In Good News Ahead of Budget, GDP Growth Revised Upwards to 7.6%

In Good News Ahead of Budget, GDP Growth Revised Upwards to 7.6%

India's economic growth, measured by gross domestic product, grew at 7.3 per cent in the December quarter (Q3), meeting estimates. For the full year, the government now expects GDP to grow at 7.6 per cent, which is slightly ahead of estimates. Last fiscal (2014-15), India's economy grew at 7.2 per cent.

The upward revision in annual GDP estimates comes as a shot in the arm of Finance Minister Arun Jaitley, who will present the annual budget on February 29.

"The third-quarter data has surprised on the upside as high frequency indicators such as PMI, some segments in the services sector, and core industrial output (had) pointed to a loss in momentum," said Shubhada Rao, chief economist at Yes Bank.

The rise in full year growth estimate was made possible because of the upward revision in June quarter (Q1) and September quarter (Q2) GDP growth. The government today revised Q1 GDP growth from 7.1 per cent to 7.6 per cent, while Q2 growth was revised upwards from 7.4 per cent to 7.7 per cent.

December quarter growth was fueled by double-digit growth in manufacturing sector. However, the agriculture sector output contracted by 1 per cent, government data showed.

"The third-quarter GDP has already started showing a slowdown and agriculture stresses because rabi is also lagging. It is difficult to see any pick-up in agriculture," said Rupa Rege Nitsure, group chief economist of L&T Finance Holdings.

According to the latest data, Indian economy is expanding at a faster pace than China, where GDP growth hit a nearly seven-year low of 6.8 per cent in the December quarter.

However, many economists say India's GDP numbers have been bumped up by the statistical change adopted to calculate growth last year. They say that the pace of expansion of the economy as measured by new GDP numbers don't match with other economic indicators like auto sales, power demand, and imports of capital goods.

The new data is a headache for Mr Jaitley, who faces tough choices in his February 29 budget over whether to hike borrowing and spending to compensate for the sluggish private sector spending, say economists.

"Our own proprietary tool based on real economy indicators suggest that economic momentum has been decelerating systematically from 1QFY16 to 3QFY16," said Ritika Mankar, economist at Ambit Capital.

(With inputs from agencies)