Tuesday, 12 April 2016

Faster private sector growth bodes well for Indian economy

Amid the global slowdown, Indian economy seems to be gaining strength day by day, justifying the title of being the world’s fastest growing major economy, as strong macroeconomic fundamentals, favourable business sentiments and downward trend in interest rates are significantly supporting the Asia’s third biggest economy.

Indian services activity expanded at a quicker pace in the month of March driven by a marked acceleration in new business, signaling strong underlying demand in Asia’s third biggest economy which is withstanding a global slowdown.

The Nikkei India Services Business Activity Index climbed to 54.3 in March from 51.4 in February, with a reading above 50 signaling expansion.

Climbing to the highest level in 37 months, the composite gauge measuring manufacturing and services in India climbed at 54.3 in March from 51.2 in February driven by faster increases in both the sectors.

Further, the government’s vow to stick to its budget deficit goals, easing inflation and a recent reduction in the interest rates on small savings instruments gave the Reserve Bank of India (RBI) additional room to bolster monetary easing in a bid to buoy demand and encourage investments in the country’s economy.

As expected RBI delivered an interest rate cut, its first in six months while signaling a continued accommodative monetary policy stance to help power growth in Asia’s third biggest economy. The central bank lowered the repo rate by 25 basis points to the lowest level since March 2011 at 6.5 per cent from 6.75 per cent.

The RBI kept unchanged its gross-value added growth projection for FY 2017 at 7.6 per cent while inflation is expected to decelerate at a modest rate to hover around the 5 per cent mark through March 2017.

Going forward, policy reforms initiated by the government, lower interest rates and a surge in investment activity would be the key triggers in propelling the economy on an upward trajectory.

Latin Manharlal

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