India Regains World’s Fastest Growing Economy Tag

India became the world’s fastest growing economy in the October-December quarter, an analysis of the government data released on Feb. 28 showed. A pick-up in manufacturing and service sectors pushed the growth of gross domestic product to 7.2 per cent in the quarter from a year earlier when the economy lagged behind China. This is the highest quarterly growth recorded since July-September quarter in the year 2016-17.

According to a Reuters poll, more than 35 economists had put the economic growth at 6.9 per cent in the October-December quarter. For the same period, China recorded growth of 6.8 per cent.

The data from Central Office of Statistics was released on the same day China announced that its manufacturing activity suffered its largest fall in seven years, the Financial Times reported. As per the report, the Chinese statistics are also affected by the Chinese new year holiday, which resulted in widespread closure of factories.

Economists are expecting more growth in GDP in the coming year. “Settling down of Goods and Services Tax (GST) reforms will boost growth in next fiscal year,” Anita Gandhi, a director at Arihant Capital Markets, was quoted as saying by NDTV. Moody’s Investors Service project that India will grow at 7.6 per cent in the year 2018 and 7.5 per cent in 2019.

According to Economic Affairs Secretary Subhash Chandra Garg, 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. He also was quoted as saying that strong fixed capital growth also indicates that investment is picking up very well and agriculture and services have performed quite well.

The data shows significant acceleration of real economic activity as projected in the Economic Survey and marks a “turnaround in the country’s economic growth momentum,” as per the Finance Ministry.

Due to the effects of demonetization and during the run-up to the launch of the Goods and Services Tax on July 1, India recorded a three-year low GDP fall of 5.7 per cent in the April-June quarter. In July-September quarter, it rose to 6.5 per cent annually.

For the fiscal year ending this month, the government revised its GDP growth forecast higher to 6.6 per cent from 6.5 per cent earlier. In the October-December quarter, the gross valued added (GVA) also grew 8.9 per cent higher than 6.8 per cent in previous quarter.

The farm sector GVA grew at 4.1 per cent as compared to 2.7 per cent in the July-September quarter.

As opposed to the 2.8 per cent growth recorded in the previous quarter, the construction sector saw 6.8 per cent growth. In the services sector, which includes financial services, the growth was 6.7 per cent, up from 6.4 per cent in the previous quarter.