Modi Government Gets a Boost as GDP Growth Hits 2-1/2-Year High
NEW DELHI : India’s GDP grew at the fastest pace in nine quarters in a signal that the worst may be over for Asia’s third largest economy. A sharp rebound in manufacturing and mining sectors in the April-June quarter helped the overall growth. At 5.7 per cent, GDP growth in the first quarter was sharply higher than 4.6 per cent growth registered between January and March and ahead of Reuters estimate at 5.3 per cent.
Manufacturing, which contributes 15 per cent of the economy, expanded at an annual rate of 3.5 per cent during the April-June quarter compared with a contraction of 1.2 per cent a year ago. Mining sector grew 2.1 per cent compared with a 3.9 per cent annual fall a year earlier. However, the annual farm output growth slowed to 3.8 per cent in the quarter, from 4 per cent a year ago. The better-than-expected growth data comes at a time when economists have been pointing to several green shoots in the economy and will boost investor confidence.
“We are at the starting point of the pickup in the growth cycle in India,” said Sonal Varma, an economist with Nomura. “This data gives us the first sign into that.” Analysts attributed the rebound in growth to steps taken by the previous government to kick-start capital investments and spur consumer demand as well as the psychological boost provided by new Prime Minister Narendra Modi. In the first 100 days, Mr Modi’s government has opened up the country’s defence and railways sectors for foreign investment.
Several steps have been taken to improve the ease of doing business such as online clearance for environmental submission, etc. The year-on-year growth has been helped also by a favourable statistical base because of weak economic activity last year. The better-than-expected growth data is likely to boost stock markets, which seem to be favourably disposed to the new administration. The 50-share Nifty is up nearly 9 per cent since May 16, when Mr Modi won a historic mandate. (Read the full story here) India needs to grow at 8 per cent to provide jobs for the 10 million people who are expected to join the workforce every year.
