India’s GDP grows 8.2% in June quarter

Falling rupee, monetary tightening however pose risk to growth

India’s annual economic growth surged to a more than two-year high of 8.2 per cent in the three months through June, thanks to strong performance of manufacturing and consumer spending.

Should the economy keep up this momentum it will stand Prime Minister Narendra Modi in good stead when he seeks re-election next year, and dispel some of the criticism that his economic reforms haven’t resulted in faster growth sooner.

The latest period’s annual pace beat a Reuters poll forecast of 7.6 per cent, and was the highest since India logged 9.3 per cent growth in the January-March quarter of 2016.

It easily surpassed the 6.7 per cent growth posted by China for the same quarter, and it restored India’s growth to levels posted by the Congress governments during the decade before Modi’s Hindu nationalist Bharatiya Janata Party swept to power in 2014.

In the same quarter last year, India’s growth languished at 5.6 per cent — far too slow to generate jobs for the mass of young people joining the labour market each year.

Still, India’s $2.6 trillion (Dh36.73 billion) economy surpassed France’s in 2017 to become the world’s sixth largest, and it was not far behind the United Kingdom, according to World Bank data.

Better rainfall this year, and government spending have given households more money to buy consumer durables, which helped the manufacturing sector post 13.5 per cent growth in June quarter, in sharp contrast to the 1.8-per cent contraction recorded a year earlier.

“This is probably the best GDP trend we have seen in the first half of the fiscal year,” said Shashank Mendiratta, India economist at ANZ Bank.

On Wednesday, India’s central bank said economic growth was expected to accelerate to 7.4 per cent in the fiscal year ending next March, bettering the 6.7 per cent posted last fiscal year.