NEW DELHI: India’s economy expanded at the fastest pace in nine quarters, as strong domestic consumption and robust manufacturing growth stamped out global trade-war worries.
Gross domestic product grew a stunning 8.2% in the three months ended June from a year earlier, the Statistics Ministry said in a statement in New Delhi on Friday. That was faster than the 7.6% median estimate in a Bloomberg survey of 42 economists. Only one economist, Saugata Bhattacharya of Axis Bank Ltd., accurately predicted the pace.
The government expects the economy to expand more than 7.5% in the fiscal year to March 2019, Subhash Chandra Garg, economic affairs secretary in the finance ministry, said in New Delhi, adding that growth was now on a steady track.
Reforms and fiscal prudence are serving the economy well and this growth in an environment of global turmoil represents the potential of India, Finance Minister Arun Jaitley said via Twitter posts.
India grew by a sub-par 6.6% in fiscal 2018, provisional estimates showed, as lingering effects of a cash ban in 2016 and the chaotic introduction of a consumption tax hurt demand.
Gross value added — a key input of GDP that strips out taxes — rose 8% in April-June versus 7.5% survey estimate Agriculture expanded 5.3%, manufacturing rose 13.5%
The numbers cement India’s position as the world’s fastest-growing major economy, putting it ahead of China, where an intensifying trade conflict with the US is dimming the growth outlook. The South Asian economy may receive a further boost from an anticipated increase in government spending in coming months, as Prime Minister Narendra Modi tries to boost his party’s prospects in the general election due in 2019.
There are headwinds to growth in the form of higher oil prices, tightening global financial conditions and a shortfall in taxes that can put budget targets out of reach. The rupee’s slump to a new low below 71 to the dollar on Friday could possibly deter foreign investors, fan imported inflation and prompt intervention from the central bank — all carrying implications for growth.
“The growth numbers are good but will it be sustainable is the material question,” Gaurang Shah, chief investment strategist at Geojit Financial Services Ltd. in Mumbai. “The currency remains the joker in the pack and can play a spoilsport.”
For now, the International Monetary Fund is forecasting Asia’s third-biggest economy will grow 7.3% in the fiscal year through March 2019 and 7.5% in the next. The Reserve Bank of India, which has increased interest rates twice since June to curb inflation, expects the economy to expand 7.4% in fiscal 2019.
What Our Economists Say….. The key takeaway — pick-up in growth, sans demand pull inflationary pressure in the economy, supports Bloomberg Economics thesis that reforms have lifted India’s potential growth and the recovery ahead is likely to remain non-inflationary.– Abhishek Gupta, Bloomberg Economics