At 7.2%, growth picks up pace in third quarter

India overtakes China as fastestgrowing economy

India’s economy grew 7.2% in the three months ended December 31, the fastest pace in five quarters, regaining its status as the world’s fastest-growing major economy.

The recovery was led by a revival in investment demand, which registered a 12% growth.

Based on the fiscal third-quarter, the full year’s growth has been revised upwards to 6.6%. If this growth rate is realised, the size of the Indian economy is projected to grow to $2.6 trillion by the end of March.

Not only does this signal that the Indian economy is tiding over the disruptions — triggered by the demonetisation of high-value currency notes and the rollout of the goods and services tax — the latest quarterly corporate earnings data also suggests that consumer demand is reviving.

To achieve the 6.6% growth projection of the second advance estimate, the economy will have to grow at 7.1% in the fourth quarter of 2017-18. The economy expanded 6.5% in the second quarter and 5.7% in the first.

It grew by 7.1% in 2016-17, 8.2% in 2015-16 and 7.4% in 2014-15.

The Central Statistics Office (CSO) had in its January projections estimated that the economy will grow at 6.5% in 2017-18, but has now marginally revised it upwards, though it is still lower than the 6.75% estimated by the Economic Survey.

In the December quarter, economic activity picked up across sectors, with the exception of mining and quarrying, data released by CSO on Wednesday showed.

Significantly, gross fixed capital formation — an indicator of investment demand in the economy — also registered a sharp increase of 12%.

Private final consumption expenditure grew 5.6%, while government final consumption expenditure rose 6.1%.

To be sure, a part of the acceleration can be attributed to the base effect. India cancelled high-value banknotes on November 8, 2016, leading to widespread disruption in economic activity.