DNA Money Edit: Head start for India's economic engine

The 2018-19 fiscal has begun on a promising note. Most economists have projected the economic growth in the first quarter to come between 7.25% and 7.6% as industrial output and private investment pick up, despite a challenging milieu. This is indeed a leap from 5.6% growth reported during the same period last year, due to the demonetisation hangover and the impending implementation of Goods and Services Tax (GST) then, which had resulted in huge destocking by businesses. The GST implementation has surely enhanced the potential growth of India.

The first quarter growth is primarily driven by domestic factors. There is a revival in investment, with both private and public sector investments growing. The private investment is gathering momentum now while capacity utilisation figures show better days ahead.

The consumption and the capital expenditure data have fuelled confidence among economists during the first quarter number. However, many of them believe that India is lagging in its potential growth which is pegged somewhere close to 8%. Though some aver that the external sector is still not so important for the Indian economy, falling rupee and rising oil bill along with worsening current account deficit (CAD) can throw some challenges. In an uncertain global environment marked by rising interest rates and US-China tariff war, the rupee has potential to turn volatile and jeopardise growth calculations.