India’s economic growth picked up sharply in the third quarter (October-December), expanding by 7.2 percent to indicate a possible turnaround in the economy after demonetisation and GST’s rollout.
This is the fastest GDP growth in five quarters and India has once again regained its status as the world’s fastest-growing major economy, surpassing China, after a gap of one year.
The Central Statistics Office (CSO) also revised its estimate of GDP growth for the full year (2017-18) to 6.6 percent, against its earlier estimate of 6.5 percent. It also revised upwards its GDP growth estimate for the July-September quarter (2017-18 second quarter) to 6.5 percent, up from the earlier estimate of 6.3 percent.
Before seeing an expansion in the second quarter of 2017-18, the Indian economy had fallen for five straight quarters, raising concerns in government circles. Thus the acceleration in the second and now sharp growth in the third quarter indicates the country has finally come out from the impact of demonetisation and GST jitters.
2018-19 too could bode well for India as the global economy is likely 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 percent in 2016-17, eight percent in 2015-2016 and 7.5 percent in 2014-15.
In the October-December quarter, the manufacturing sector grew by 8.1 percent, against 6.9 percent in the previous quarter (second quarter). The agriculture sector too witnessed the fast growth of 4.1 percent, against 2.7 percent in the second quarter. The construction sector grew by 6.8 percent in the third quarter, compared to 2.8 percent in the previous quarter. Services growth is projected to accelerate to 7.7 percent in the third quarter of 2017-18, up from 7.1 percent in the previous quarter.
The finance ministry said the data indicates 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, a real gross fixed capital formation is estimated to grow at a robust 7.6 percent for 2017-18, accelerating from 6.9 percent in second quarter 2017-18 to 12 percent in third quarter 2017-18,” it added.
For 2017-18, agriculture is projected to slow down to three per cent, against 6.3 per cent in 2016-17, and construction will grow by 4.3 per cent, compared to 1.3 per cent in 2016-17. However, the manufacturing sector in 2017-18 will grow by 5.1 percent, against 7.9 percent in the previous fiscal.
“Improvement was broad-based, with a pickup in most production/investment demand indicators. Looking ahead, the likelihood of higher rural incomes (on higher MSPs) and pre-election spending is likely to be supportive of 2018-19 numbers,” said Radhika Rao, India economist of DBS Bank.