The Indian economy is forecast to grow 7.4% in 2014-15 after a robust 7.5% expansion in the October-December quarter, overtaking China as one of the fastest growing major economies.
Data released by the Central Statistics Office (CSO) showed the economy is expected to grow faster than previous fiscal's 6.9% and above the expected 5.5% growth under the old series.
The Chinese economy had grown 7.3% in the last quarter and Monday's data showed that India's December quarter (Q3) growth had outpaced China's expansion. The World Bank and the International Monetary Fund (IMF) had forecast that the India will outpace China's growth in 2016-17.
The CSO data showed the economy grew 8.2% in the July-September quarter and 6.5% in the April-June quarter, Under the old series, growth in the September quarter was 5.3% and for the June quarter the figure was 5.7%.
Last week, the CSO revised upwards the GDP growth for 2013-14 to 6.9% from the previously reported 4.7% due to a change in the base year to 2011-12 and a new method of measuring the size of the economy. The sharp revision has attracted criticism and some economists have expressed doubts about the numbers and the revision methodology.
"Based on this performance it does look that the Budget will target growth of 7.5-8% in its calculations for FY16 as the policy measures adopted and stable economic conditions will facilitate such growth next year," said Madan Sabnavis, chief economist at Care Ratings.
"There are still some anomalies in reconciliation of Index of Industrial Production (IIP) data with GDP data as manufacturing shows growth of 6.8% for FY15, which looks unlikely under the IIP, which will probably be between 2-3%. The difference may be attributed to the GDP being based on value-added concept, while IIP is on production — though the two should ideally converge," said Sabnavis.
Economists expect the economy to recover but they said there is unlikely to be any change in RBI's stance on rates, which is guided by the inflation trajectory.
"Looking ahead, with government spending normalising and the subsidy bill falling, we expect GDP growth to improve in coming months, largely from a pick-up in public investment spending, which will likely crowd in private investments as well, while private consumption is expected to improve at a steady pace," said Siddhartha Sanyal, economist at Barclays.
Policymakers had expressed surprise at the sharp revision in growth after the CSO revised the way it measures the economy.
"We find it hard to see the economy as rollicking in 2013/14," Reserve Bank of India governor Raghuram had said last week after the monetary policy review. "It's premature to take a strong view based on these GDP numbers."
Chief economic advisor Arvind Subramanian had also expressed surprise. "I am puzzled by the GDP growth numbers and, consequently, all the constituent elements that went into constructing it," Subramanian had told a newspaper. "We have to be very careful in using these numbers for policy-making," he had said when the CSO revised the GDP data.
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