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GDP Growth Picks Up Pace, India Fastest Growing Economy Again Ahead of China

For the fiscal year ending March 31, 2018, the government revised its GDP growth forecast higher to 6.6 per cent from 6.5 per cent earlier.

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Economists widely expect India's GDP growth to accelerate further this year.

Highlights

  1. GDP growth accelerates to 7.2% in October-December quarter
  2. Economists polled by Reuters had forecast a growth of 6.9%
  3. Economy expected to grow at 6.6% in 2017-18
India regained the status of the world's fastest-growing major economy in the October-December quarter, driven by a pick-up in growth in manufacturing and services sectors. Gross domestic product or GDP grew 7.2 per cent in in the October-December quarter from a year earlier, according to government data released on Wednesday. This is the highest quarterly growth recorded since July-September quarter of 2016-17. The growth rate is higher than what the Street had expected. A Reuters poll of more than 35 economists estimated the economy to grow 6.9 per cent in the October-December quarter. 

China had recorded a growth of 6.8 per cent in the December quarter.

India's GDP or gross domestic product growth had fallen to a three-year low of 5.7 per cent in the April-June quarter due to destocking in the run-up to the July 1 launch of the goods and services tax (GST) and a lingering impact of demonetisation. But in July-September quarter, the economic growth picked up to a revised 6.5 per cent annually.

Meanwhile, for the fiscal year ending March 31, 2018, the government revised its GDP growth forecast higher to 6.6 per cent from 6.5 per cent earlier.

During the December quarter, the gross valued added (GVA) for manufacturing 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.

Separately, infrastructure output grew by a strong 6.7 per cent in January from a year ago, government data showed on Wednesday. The growth in output compares with an upwardly revised 4.2 per cent year-on-year growth in December. Infrastructure output, which comprises eight sectors such as coal, crude oil and electricity, accounts for nearly 40 per cent of industrial output.

Economists widely expect India's GDP growth to accelerate further this year. "Settling down of Goods and Services Tax (GST) reforms will boost growth in next fiscal year," said Anita Gandhi, a director at Arihant Capital Markets. Moody's Investors Service estimates India to grow at 7.6 per cent in calendar year 2018 and 7.5 per cent in 2019, amid signs of economic recovery from impact of demonetisation and GST.

The Indian economy is in a high growth mode and 7.2 per cent expansion in the December quarter marks its return as the fastest growing major economy in the world, Economic Affairs Secretary Subhash Chandra Garg said. He said strong fixed capital growth also indicates that investment is picking up very well and agriculture and services have performed quite well. "Very encouraging and solid 3rd quarter growth numbers from CSO. 7.2 per cent growth marks return of India as the highest growing major economy in the world," Mr Garg said in a tweet. (With Agency Inputs)

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