In­dia's econ­omy grows bet­ter than ex­pected 7.3pc in last quar­ter

The Pak Banker - - MARKETS/SPORTS -

In­dia's econ­omy ex­panded 7.3 per­cent in the third quar­ter of the fi­nan­cial year, of­fi­cial data showed Mon­day, sug­gest­ing it re­mains on track as the world's fastest-grow­ing ma­jor econ­omy.

The year-on-year ex­pan­sion in gross do­mes­tic prod­uct (GDP) for the three months to end-De­cem­ber rep­re­sented a slow­down from the pre­vi­ous quar­ter but beat a 7.1 per­cent me­dian es­ti­mate fore­cast by econ­o­mists in a Bloomberg sur­vey. The ro­bust data will pro­vide a boost for Prime Min­is­ter Naren­dra Modi, com­ing as In­dia's rightwing leader nears two years in power amid mount­ing calls to en­act promised re­forms.

In­dia's sta­tis­tics min­istry on Mon­day also fore­cast the econ­omy would grow 7.6 per­cent over the full year 2015-16.

It sharply re­vised up the growth rate for the pre­vi­ous two quar­ters, in­clud­ing rais­ing the fig­ure for the July-Septem­ber quar­ter to 7.7 per­cent, up from 7.4 per­cent re­ported ear­lier. How­ever, sev­eral ex­perts ques­tioned the data, say­ing it did not tally with the sig­nals com­ing from many sec- tors of the In­dian econ­omy.

"I'm ab­so­lutely sur­prised by this," said Ku­nal Kundu, In­dia Econ­o­mist at So­ci­ete Gen­erale in Ban­ga­lore, of the up­ward quar­terly data re­vi­sion.

"The growth they are talk­ing about be­comes all the more un­ten­able on the face of what we are see­ing in the coal sec­tor, roads, freight, ex­ports con­tract­ing for 13 months in a row," he told AFP.

Modi has made boost­ing eco­nomic growth a pri­or­ity since sweep­ing to power in May 2014 and has been buoyed in re­cent months by a growth rate that has ex­ceeded that of pow­er­house China.

But in­vestors have raised con­cerns about the pace of promised eco­nomic re­forms needed to cre­ate jobs for In­dia's tens of mil­lions of young peo­ple.

The ru­pee is Asia's worst-per­form­ing cur­rency so far this year as global funds have pulled out of In­dian stocks, ac­cord­ing to Bloomberg.

"At face value th­ese are ex­tremely strong fig­ures. The big­ger doubts arise when we try to align the GDP data with what we know of the econ­omy's health from other sources," an­a­lysts at Cap­i­tal Eco­nom­ics said Mon­day's data.

"We should take the of­fi­cial GDP data, and the rate of growth they are sug­gest­ing, with a pinch of salt," they said.

Modi's Bharatiya Janata Party-led govern­ment will present its next bud­get on Fe­bru­ary 29, with the pri­vate sec­tor clam­our­ing for tax re­forms to sim­plify the cur­rent regime, among other de­mands.

In­dia's cen­tral bank kept in­ter­est rates on hold last week, cit­ing the im­por­tance of con­trol­ling in­fla­tion, which has ticked up in re­cent months.

The Re­serve Bank of In­dia said the bench­mark repo rate, the level at which it lends to com­mer­cial banks, would re­main at 6.75 per­cent.

Al­though it is a much smaller econ­omy, In­dia's cur­rent growth rate com­pares favourably with that of China, which ex­panded 6.9 per­cent in 2015, its slow­est pace in a quar­ter of a cen­tury. Yet In­dia is still dogged by con­cerns over the re­li­a­bil­ity of its eco­nomic growth data a year af­ter the govern­ment in­tro­duced a re­vised for­mula for cal­cu­lat­ing GDP which some an­a­lysts have crit­i­cised.

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