Indian economy grows at 7.2% in Q3

India has again regained its status as world’s fastest-growing major economy

India’s economic growth picked up sharply in October-December quarter (third quarter) expanding by 7.2 per cent, which indicates that economy has turnaround after demonetisation and GST.

This is the fastest growth in GDP in five quarters and India has once again regained its status as world’s fastest-growing major economy, surpassing China’s after a gap of one year. Central Statistics Office (CSO) also revised its estimate of GDP growth for full year of 2017-18 to 6.6 per cent against its earlier estimate of 6.5 per cent.

It also revised upwards its GDP growth estimate for the July-September quarter (second quarter of 2017-18) to 6.5 per cent from previous estimate of 6.3 per cent.

Before seeing an expansion in second quarter of 2017-18, Indian economy had fallen for straight five quarters raising concerns in government circles. So acceleration in second and now sharp upward growth in third quarter indicates that the country has finally come out from the impact of demonetisation and GST jitters.

The 2018-19 too could bode well for India as global economic is expected to move up in the new year.

“Global economic growth will turn higher and peak in 2018,” said rating agency Moody’s on Wednesday.

GDP had grown by 7.1 per cent in 2016-17, 8 per cent in 2015-2016 and 7.5 per cent in 2014-15. In the October-December quarter the manufacturing sector grew by 8.1 per cent against 6.9 per cent in the previous quarter (second quarter).

The agriculture sector too witnessed a fast growth of 4.1 per cent against 2.7 per cent in the second quarter. The construction sector grew by 6.8 per cent in the third quarter compared to 2.8 per cent in the previous quarter. Services growth is projected to accelerate to 7.7 per cent in the third quarter 2017-18 from 7.1 per cent in the previous quarter.

The economic growth picked up sharply in Q3 expanding by 7.2 per cent, which indicates that economy has turnaround after demonetisation and GST.

Finance ministry said that the data indicate a broad-based and significant acceleration of real economic activity as projected in the Economic Survey.

It said that such robust growth in manufacturing and significant acceleration in construction mark a turnaround in the country’s economic growth momentum.

“Significantly, heralding an improvement in the investment climate, real gross fixed capital formation is estimated to grow at a robust 7.6 per cent for FY18, accelerating from 6.9 per cent in second quarter FY18 to 12 per cent in third quarter FY18,” it added.

For FY18, agriculture is projected to slowdown to 3 per cent against 6.3 per cent in FY17.

However, manufacturing sector in FY18 will grow by 5.1 per cent against 7.9 per cent in the previous fiscal. “Improvement was broad-based, with a pick up in most production/investment demand indicators. Looking ahead, the likelihood of higher rural incomes and pre-poll spending is likely to be supportive of FY19 numbers,” said Radhika Rao of DBS Bank.