India's Quarterly GDP Increases 7.2%

Laura Christensen
March 3, 2018

India grew at more than 9 percent a year from 2005 through 2008.

Moody's Investors Service estimates India to grow at 7.6 per cent in calendar year 2018 and 7.5 per cent in 2019, amid signs of economic recovery from impact of demonetisation and GST. India's GDP data are not particularly dependable measures of growth.

Amid a slightly improved growth outlook and some upside risk to inflation, India's central bank is expected to keep benchmark interest rates on hold at 6% in the near-term.

That was followed by the introduction of a goods & services tax last July, which was the catalyst for a sharp contraction in manufacturing activity.

Market watchers said that the December quarter growth was likely driven by increased consumption and higher exports.

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Electricity generation growth also fast paced to 8.2 percent in January against 5.2 percent in January 2017. Similarly, the better-than-expected growth of 4.1% for agriculture is also good news, especially in view of widespread reports of rural distress.

"Government spending, which declined 1.8% YoY in the previous quarter, was up 24.6% in 3QFY18". In a similar vein, saying that the GDP numbers paint a "pretty good macro picture" for Indian economy, Assocham added that it gives "hope for a good pace of economic growth in the next fiscal as the stage is now set in 2017-18". Automobile sales possibly paint the brightest picture for Q3 FY2018. "GDP trends are consistent with the robust growth of the manufacturing Purchasing Manager's Index, the Index of Industrial Production, and consumer demand", the economist pointed out.

Taking credit growth and rise in construction, as per John, this should support the real estate, financial and professional services segment. The IIP (Q-o-Q % change) grew at 4.38 percent in December 2017 as compared to 0.50 percent in September 2017. India scrapped some 86 per cent of its currency by value in November 2016 and then brought in a complex system of taxation - GST in July past year - confounding traders and small businesses.

Among the services sector component, the output of trade, hotels, transport, communication and services related to broadcasting jumped 9.0%, financial, real estate and professional services 6.7%, and public administration, defence and other service 7.2% in Q3 of 2017-18.

"We expect a rate hike from RBI, most likely at the August review", said Abhishek Upadhyay, economist, ICICI Securities Prime Dealership, citing inflationary pressures.

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