Helped by a pick up in manufacturing, India's economy grew by 7.4% in July-September, outpacing China, in percentage terms, to become the fastest growing major economy, also supporting the case for RBI to keep interest rates steady.
Helped by a pick up in manufacturing, India's economy grew by 7.4% in July-September, outpacing China, in percentage terms, to become the fastest growing major economy, also supporting the case for RBI to keep interest rates steady.
While the gross domestic product or GDP of Asia's third-largest economy expanded 7.4% in Q2 from 7% in the previous quarter, growth rate of eight core infrastructure industries slowed to 3.2% in October.
GDP growth rate, however, was lower than the 8.4% recorded in the July-September quarter of the previous fiscal.
Amid global headwinds, Chinese economy has slowed down while other emerging economies of Brazil to Russia are contracting. China expanded by 6.9% growth in July-September while Russia contracted by 4.1% and Brazil is forecast to shrink by 4.2%.
The world-beating pace, most analyst said, supported case for the Reserve Bank of India (RBI) Governor Raghuram Rajan to hold rates at the bi-monthly monetary policy review on Tuesday.
Manufacturing output rose 9.3% in Q2 and financial services 9.7%. Electricity and gas production rose 6.7% while the construction sector expanded 2.6%.
Buoyed by Q2 numbers, Finance Minister Arun Jaitley said the GDP in the current fiscal will be better than the 7.3% growth rate recorded in last financial year and improve further in the subsequent years.
The "significant" 9.3% growth in the manufacturing sector was despite adverse global situation. "I think the Q2 figures give us a sense of satisfaction... We expect growth this year to be better than last year and even better the next year," he said.
Growth is mostly driven by public spending than private consumption. Investments grew 6.8% in Q2 compared with 4.9% in April-June.
Fiscal deficit in the first seven months of the fiscal too showed an improved. At the end of October, it was at Rs 4.11 lakh crore, or 74%, of the Budget estimate for the whole year as against 89.6% a year ago.
As regards the GDP data, Economic Affairs Secretary Shaktikanta Das tweeted the second quarter growth at 7.4% strengthens positive outlook for current year. "7.5% for the year looks achievable".
Manufacturing growth at 9.3% is an important growth driver, he said adding "will continue to work for bigger success of Make in India".
According to CII Director General Chandrajit Banerjee, the GDP growth at "7.4% in the second quarter of FY16 indicates that the recovery has gained strength, as we had anticipated."
He further said, "...construction is one sector where the growth rate has fallen significantly. Policy measures therefore need to focus on a revival in project execution in manufacturing, real estate and infrastructure." According to Deloitte the numbers "portrayed an economy which was gradually recovering.
"On the flipside, agriculture growth remained muted while growth in services was mixed. Financial services showed a slight improvement while the category of trade, hotels and communication moderated from the previous quarter." The data also revealed Gross Value Added (GVA), a new concept introduced by CSO to measure the economic activity, also accelerated during the second quarter to 7.4%, from 7.1% in the April-June period.
It said the economic activities which registered growth of over 7% in the second quarter are trade, hotels and transport & communication and services related to broadcasting, financial, insurance, real estate and professional services and manufacturing.
The government had projected a growth rate of 8.1-8.5% for the current fiscal.
The data showed that the manufacturing sector GVA at constant prices (2011-12) rose 9.3% in July-September quarter as against 7.9% in the year-ago period.
The output of mining and quarrying sector rose to 3.2%, from 1.4% a year ago.
The trade, hotel, transport, communication and services related to broadcasting segment grew at 10.6% in the quarter under review compared to 8.9% year ago.
Financial, real estate and professional services growth shrank to 9.7% against 13.5% a year earlier.
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