India logs 7.4% growth in second quarter, pips China

NEW DELHI:Showing further momentum in its recovery mode, India’s economic growth showed an uptick to 7.4 per cent in the July-September quarter, overtaking China as the world’s fastest growing major economy, with agriculture growth being the positive surprise despite patchy rains while the construction sector has nearly collapsed.

Sanjeev Sharma

Tribune News Service

New Delhi, November 30

Showing further momentum in its recovery mode, India’s economic growth showed an uptick to 7.4 per cent in the July-September quarter, overtaking China as the world’s fastest growing major economy, with agriculture growth being the positive surprise despite patchy rains while the construction sector has nearly collapsed.

The strong GDP numbers and improvement would imply the RBI holding on to interest rates at its monetary policy review tomorrow.

Surprisingly, India Inc has cautioned the government that business confidence has moderated and domestic companies are guarded on making investments.

Industry body, Ficci said the global economy had been volatile and domestic demand is restrained. “Both the government and the RBI have been factoring in the aberrations and amidst this situation it is critical to keep the optimism intact. There has been some moderation in the confidence level of India Inc and the same has been reflected in our latest Business Confidence survey. The domestic private investors still have a guarded outlook with regard to investments,” it said.

The signs of recovery in the GDP, from a growth rate of 7 per cent in the quarter ended June 30, will be a boost for the government’s economic reforms agenda with manufacturing and services both showing a jump.

The GDP expansion by 7.4 per cent in the second quarter of the current fiscal bettered 6.9 per cent growth in China for the same period.

Chandrajit Banerjee, Director General, CII, said the GDP data showing growth of 7.4 per cent in the second quarter of financial year 2016 indicated that the recovery had gained strength.

He said the acceleration in the manufacturing sector showed that the “Make in India” campaign with its objective of raising the growth rate in the manufacturing sector had begun to make an impact.

The surprise performer has been agriculture. Aditi Nayar, senior economist, ICRA, said the key surprise in the initial growth data for Q2FY16 is the uptick in growth of agriculture, forestry and fishing, belying the concerns regarding the extent of drag generated by the unfavourable monsoon on the crop sector.

Devendra Kumar Pant, Chief Economist, India Ratings & Research (a Fitch group company), said while agriculture continued to surprise positively, construction activities nearly collapsed. Continued growth momentum of the financial sector and robust manufacturing growth (highest since 2QFY13) was encouraging, he said.