India Economic Growth Soars In March Quarter

(RTTNews) - India maintained its coveted status as the fastest growing major economy in the world as growth accelerated strongly in the three months to March.

Gross domestic product grew 7.9 percent year-on-year in the three months to March, figures from the Central Statistics Office showed Tuesday, which was well above the 7.5 percent economists had expected.

The December quarter growth was revised down to 7.2 percent from 7.3 percent and the September quarter figure to 7.6 percent from 7.7 percent.

The country thus surpassed China's 6.7 percent growth for the March quarter, which was the weakest expansion since 2009.

For the fiscal year ended March 31, the economy expanded 7.6 percent, in line with earlier estimates by the government. In 2014-15 financial year, growth was 7.2 percent.

In the March quarter, manufacturing growth eased slightly, but remained robust at 9.3 percent. Mining and quarrying output rose at a faster rate of 8.6 percent. Utility sector output growth improved strongly to 9.3 percent from 5.6 percent.

A rebound was witnessed in farm output that grew 2.3 percent after a 1 percent slump in the previous quarter. Forecasts for a good monsoon season could see the farm sector output improve further in the coming quarters.

The strong growth figure could be a boost to the government that is trying to attract more foreign investors into the country. India continues to be described as "the bright spot" globally.

That said, economists took today's strong growth data with a pinch of salt as they are not in sync with other figures for the economy. Recent survey data have shown subdued growth in manufacturing, and weaker investment and bank lending growth.

Even the Reserve Bank of India Governor Raghuram Rajan has sought caution and urged the country not to be too ambitious regarding growth given the high uncertainty over global outlook.

As its efforts to bring inflation lower bore fruit, the RBI slashed the key interest rate in April to its lowest level in five years. The bank is expected to maintain status quo in its policy meeting next Tuesday.

"There is some evidence that India's economy has picked up speed recently but today's remarkably strong GDP data are hard to believe," Capital Economics economist Shilan Shah said.

"Given that the RBI faces a tough challenge in meeting its inflation target for March 2017, we think that it will keep the repo rate on hold at 6.50 percent for the rest of 2016 and 2017."