Indian economy set to retain fastest growing tag: Survey

India's growth rate at 7.5 per cent between January and March, contrasts with neighbouring China, where growth has slipped to 6.7 per cent in the first quarter - the slowest in seven years.

By: Reuters | New Delhi | Updated: May 31, 2016 3:00 pm
Arun Jaitley, Finance Minister, Indian economy, growth rate, India growth rate, China growth rate, monetary policy review, Raghuram Rajan, RBI, Narendra Modi, Asian markets, defence manufacturing, public spending, US interest rates, interest rates, oil prices, oil imports, crude prices, Brexit, European Union, EU, inflation rate, infrastructure spending, foreign investments, drought, rural demand “This 7.5 per cent growth, in a global slowdown environment, has a potential to pick up even more,” Finance Minister Arun Jaitley said, talking about general trends last week.

India probably gathered momentum to hold its ranking as the world’s fastest growing large economy in the quarter through March, giving Prime Minister Narendra Modi more to celebrate about after completing two years in office last week.

Modi swept to power promising to revitalise Asia’s third-largest economy and despite a dearth of private investment and shrinking exports, his policies have had some success in cooling inflation inflation and lower interest rates have boosted consumer demand.

A Reuters survey of economists expected data out on Tuesday will show India’s gross domestic product grew 7.5 per cent year-on-year between January and March, faster than the previous quarter’s 7.3 per cent. “This 7.5 per cent growth, in a global slowdown environment, has a potential to pick up even more,” Finance Minister Arun Jaitley said last week.

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India’s upbeat outlook contrasts with neighbouring China, where growth slipped to 6.7 in the first quarter – the slowest posted by the world’s second largest economy in seven years.

Given the dim prospects for a boost from exports, Moody’s Investors Service said a recovery in private investment would be needed if India’s upturn was going to last.

“Combined with the fact that external demand is likely to remain lackluster, a sustained improvement in domestic private investment would be required for the growth momentum to be sustained,” the rating agency’s analysts wrote in a note.

Meanwhile, the Reserve Bank of India (RBI) is widely expected to keep its policy interest rate on hold at a scheduled policy review on June 7 as it waits for banks to fully pass on the previous the benefits of earlier cuts to borrowers.

Consumers, particularly in urban areas, have been encouraged by the lower rates.

Sales of passenger cars and two-wheelers are growing at a double-digit pace. Sales of new residential units recovered in the last quarter, snapping a falling trend.

Personal loans that include loans for durable goods, housing and education are growing at a rate of 19 per cent year-on-year, while credit card loans are growing at a 24 per cent clip.

With a good rains forecast for this summer, the farm sector is set to get a fillip after two successive years of drought. That bodes well for depressed rural demand.

Impending increases in wages and pensions of government employees are also expected to underpin consumer spending.

CHALLENGES

As part of his strategy to boost business and generate jobs, Modi has accelerated public spending on road construction, laying new power lines and upgrading the rail network.

He has also lifted caps on foreign investments in sectors such as insurance and defence manufacturing.

Still, an upturn in private capital investment remains elusive.

Festering bad loans have made banks wary of fresh lending, forcing cash-strapped firms to keep a lid on capital outlays and, in any case, many factories are still running well below capacity.

External uncertainties, meanwhile, are on the rise. Chances of US interest rates going up, Britain voting to leave the European Union, and China’s economy worsening all pose risks for emerging markets like India.

The South Asian nation has benefited massively from cheap crude over the past two years as its oil import bill halved, inflation fell and public finances improved.

But economists reckon oil’s recent rally above $50 a barrel could knock 20-30 basis points off the growth rate, while boosting the inflation rate by up to 60 basis points.

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  1. M
    MyTake
    May 31, 2016 at 8:43 am
    BJP need to put the economy/governance on a momentum so that the non-performers leave the race altogether. Good that the looters and their chamchas already started screaming!
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    Reply
    1. S
      secular
      May 31, 2016 at 9:18 am
      Failure policies , cyber cell adds nothing but false perpoa
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      Reply
      1. K
        Kumar
        May 31, 2016 at 7:29 am
        If the interest rates for fixed deposits, specially for foreign exchanges are kept around 5% and a very tight control on corruption and foreign exchange outflow is put, then the economy will grow at a faster rate because a lot of people from abroad can keep money in India. For people in India also the interest rate on fixed deposit should be moderately good so that a lot of people can have comfortable life. One may that it will give rise to inflation but it is seen in many countries economy decline with addition to the sufferings of people when interest rates are lowered very much. Because then people keep money in stocks which can crumble without notice.
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        1. T
          T DUTTA
          May 31, 2016 at 6:11 am
          FINANCE MINISTRY IS A VERY HUGE AREA COMPRISING INCOME TAX, S TAX, BANKING, INSURANCE, CUSTOMS, EXCISE, BUDGETIN ALLIED MATTERS, ETC ----------A SEPARATE BANKING MINISTRY OR A BANKING AND INSURANCE MINISTRY MAY NOT BE A BAD IDEA-----there are many problems in banking sector like huge npa, huge wilful defaulters, huge loan written off, so callled enormous black money in foreign banks--- A SEPARATE CABINET MINISTER OF BANKING AND INSURANCE MAY BE TRIED OUT ON EXPERIMENTAL BASIS FOR 2 YEARS
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          1. Studebaker 786
            May 31, 2016 at 4:35 am
            Will all Indian Express staff jump into a dirty pond if that happens? They should. :)
            (0)(0)
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