Indian economy posts 7.7% growth, fastest pace in nearly 2 years

An ice cream plant in Naroda, near Ahmedabad, in India. The country's expansion surpassed China's growth rate of 6.8 per cent in the January-March quarter, confirming India as the fastest growing major economy, which might strengthen expectations of
An ice cream plant in Naroda, near Ahmedabad, in India. The country's expansion surpassed China's growth rate of 6.8 per cent in the January-March quarter, confirming India as the fastest growing major economy, which might strengthen expectations of an interest rate increase by the central bank when it reviews monetary policy next week.PHOTO: AGENCE FRANCE-PRESSE

NEW DELHI • The Indian economy grew 7.7 per cent year on year in the January-March quarter, its quickest pace in nearly two years, driven by higher growth in manufacturing, the farm sector and construction.

The figure surpassed China's growth rate of 6.8 per cent in the January-March quarter, confirming India as the fastest growing major economy.

For the fiscal year that ended March 31, the Ministry of Statistics reported growth of 6.7 per cent, down from 7.1 per cent a year earlier. However, economists expect growth to be robust in the current financial year.

"Investment activity has picked up," Economic Affairs Secretary Subhash Chandra Garg told reporters, adding that the government expected a further acceleration in the coming year.

India also reported 4.7 per cent growth in annual infrastructure output in April, signalling a recovery after it slipped to a three-year low of 4.2 per cent in 2017/18.

Construction activity jumped to 11.5 per cent during the January-March quarter, after a 3.9 per cent drop in the year-ago period. Analysts said this reflected the fading impact of the government's move to scrap high-value bank notes that disrupted supply chains and caused job losses.

The data may offer a boost to Prime Minister Narendra Modi, who is set to seek a second term next year. His government launched a nationwide goods and services tax (GST) but its introduction was botched, nearly scuttling India's growth prospects in the near term.

  • 4.7%

    Growth in India annual infrastructure output in April, signalling a recovery after it slipped to a three-year low of 4.2 per cent in 2017/18.

"(It) seems like we have moved beyond the teething troubles related to GST implementation," said senior economist Tushar Arora at HDFC Bank. "The pick-up in investment activity is also a good sign."

The faster pace of growth in the latest quarter might strengthen expectations of an interest rate increase by the Indian central bank when it reviews monetary policy next week.

The ministry revised the October-December annual growth down to 7 per cent from the provisional 7.2 per cent it reported earlier.

India's recovery could be threatened by higher global crude oil prices, which last month hit US$80 a barrel, their highest since 2014.

India meets 80 per cent of its oil needs from imports.

Higher oil prices have already pressured the rupee, near a record low last week and Asia's worst performing currency.

REUTERS

A version of this article appeared in the print edition of The Straits Times on June 02, 2018, with the headline 'Indian economy posts 7.7% growth, fastest pace in nearly 2 years'. Print Edition | Subscribe