8.2% GDP Cements India's Position As World's Fastest-Growing Economy, Ahead Of China

In GVA (gross value added) terms, the GDP growth stood 8% China recorded 6.7% growth during this period This is the highest level of economic growth recorded since Q2 FY15

Friday's GDP data marks the first quarterly report of FY19.
Friday's GDP data marks the first quarterly report of FY19.

GDP or gross domestic product grew 8.2 per cent in the April-June period, government data showed on Friday. That marked the highest level of economic growth recorded since the January-March period in 2016, and cemented India's position as the fastest growing major economy ahead of China's 6.7 per cent. Strong performance in manufacturing and consumer spending contributed to the overall figure of 8.2 per cent. Friday's GDP data marks the first quarterly report of the current financial year which began on April 1, 2018. The median consensus in a poll of 50 economists by news agency Reuters had put annual GDP growth at 7.6 per cent in Q1.

The Central Statistics Office (CSO) said in its statement that areas such as manufacturing, electricity and gas registered growth of over 7 per cent during the period.

"We are the fastest growing economy... Our economy is back on the track," Economic Affairs Secretary Subhash Chandra Garg said. He also expressed hope growth could exceed estimates of 7.5 per cent this fiscal year.

"The GDP growth rate...indicates clearly that several structural reforms introduced such as GST have started giving rich dividends," Finance Secretary Hasmukh Adhia said.

In GVA (gross value added) terms, the GDP growth stood 8 per cent.

Economists welcomed the robust quarterly economic growth figures. "This is probably the best GDP trend we have seen in the first half helped by a favourable base. Going ahead, I expect the growth rate to be moderate as private investment is unlikely to grow at a faster rate due to stressed assets," said Shashank Mendiratta, India economist, ANZ Bank.

"Strong acceleration in value addition was led by the farm sector and double-digit growth in the manufacturing sector. The performance of industry and agriculture have encouragingly improved," said B Prasanna, group executive and head-global markets group, ICICI Bank.

Stock markets edged lower on Friday, ahead of release of the GDP data. BSE benchmark index Sensex fell 45 points to close at 38,645.

"While the recent fall in the rupee is likely to provide some support to exporters, rising global protectionism and slower global growth might limit the pickup in exports this year. Therefore, the major support to growth needs to come from a sustainable recovery in private consumption and investment," CARE Ratings said in a note ahead of release of GDP growth data release.

The rupee on Friday plunged to hit and close at 71 against the US dollar for the first time ever. Weakness in the dollar augurs well for exporters. Rupee depreciation combined with a widening current account deficit is likely to increase the borrowing costs of corporate, say analysts.

Trade deficit widened to a more than five-year high of $18.02 billion in July, driven largely by a surge in oil imports. Though merchandise exports rose 14.32 per cent year-on-year in July, the trade deficit widened as oil imports surged 57.41 per cent to $12.35 billion.

"Trade disruption so far hasn't played against us. Exports have grown at rate higher than the global rate, imports have also grown," Mr Garg further said.

A higher trade deficit leads to widening of current account deficit - which is the difference between inflow and outflow of foreign exchange - on an annual basis.

The Reserve Bank of India (RBI) had earlier this month retained its GDP growth projection for 2018-19 at 7.4 per cent, citing "evenly balanced" risks. In financial year 2017-18, GDP expanded at 6.7 per cent, lower than the 7.1 per cent recorded in the previous year.

(With agency inputs)