India’s economic growth quickens to 8.2% in April-June

Despite the falling rupee and the growing concerns around a possible global trade war, India’s economic growth shows signs of a sustainable, V-shaped recovery, spurred by an upswing in manufacturing activity and recovery of private investment, buoyed by strong consumer demand.

According to the Central Statistics Office (CSO), India’s Gross domestic product (GDP) growth rose to a nine-quarter high of 8.2 per cent in the first quarter of 2018-19, compared with 5.6 per cent in the same quarter last year. In the fourth quarter of 2017-18, GDP growth was at 7.7 per cent.

This surge in economic growth ahead of national elections in 2019 would help augment the government amid a debate over its economic record versus that of its predecessor following the release of back-series data recently. The robust surge in GDP data will also be factored in by the Reserve Bank of India’s monetary policy committee at its next review scheduled for October 3-5. 

Further, India continues to remain the fastest-growing large economy in the world, with China's growth coming down to 6.7 per cent in April-June 2018 from 6.8 per cent in January-March of the year.

According to the government data released, manufacturing grew at a nine-quarter high of 13.5 per cent largely owing to a low base effect, while the services sector expanded at a slower pace. The services sector grew at a pace of 7.3 per cent in Q1FY19, down from 7.7 per cent in Q4FY18.

However, economists remained sceptical of sustaining the growth momentum in the coming quarters. There are some risks for the economy looming, which includes higher oil prices, tightening global financial conditions and a shortfall in taxes that could put budget targets out of reach. Further, the rupee’s slump to a record below 71 per dollar could deter foreign investors, fan imported inflation and prompt intervention from the central bank, all of which carry implications for growth.

However, the government expects that even its projections of up to 7.5 per cent of GDP growth in FY19 may be crossed. Reforms and fiscal prudence are serving the economy well and this growth in an environment of global turmoil represents the potential of New India.

In the interim, the International Monetary Fund pegs that Asia’s third-biggest economy will grow 7.3 per cent in the fiscal year through March 2019 and 7.5 per cent in the next. The Reserve Bank of India, which has increased interest rates twice since June to curb inflation, expects the economy to expand 7.4 per cent in fiscal 2019.

Latin Manharlal Group