Tuesday, 9 February 2016

India’s economic recovery remains on firm footing.

At a time when its export-dependent emerging market peers are biting the dust, the Indian economy seems to be going from strength to strength, with Q3 GDP data signaling solid growth, a shot in the arm for the Modi government which is seeking to push through key structural reforms stuck in Parliament.

 At 7.3 per cent clocked in the October-December 2015 quarter, growth in Asia’s third biggest economy remains heads and shoulders above major global economies. While India, a net commodity importer, is benefiting from an ongoing crude oil price collapse, oil-driven economies such as Brazil and Russia are in steep recessions, and growth in China has hit a 25-year low of below 7 per cent.

The centre has pegged India’s economic growth rate for FY 2015-16 at 7.6 per cent, marking an acceleration from last fiscal’s 7.2 per cent expansion.

A quick glance at Q3 GDP figures shows that barring the farm sector which has been hit by a deficit rainfall for a second year running, most sectors of the economy are in good shape with manufacturing output surging 12.6 per cent and private consumption holding up quite well. Moreover, Gross Value Added, a proxy for economic strength rose 7.1 per cent in Q3 FY 2015-16, year on year.

Going ahead, a lot hinges on the government’s ability to stick to its fiscal deficit targets, the progress of which will be unveiled in the upcoming Union Budget. Solid news on the fiscal consolidation front could pave the way for further interest rate cuts. Further, getting over the GST hurdle is also a big test that the NDA government currently faces.  

Latin Manhralal 

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