With a growth of 8.2%, the FY19 economy starts at a high level

NEW DELHI: The Indian economy grew fastest in more than two years, driven by double-digit growth in output and robust consumer spending, and provided a strong start to the last financial year before the government party in 2019 is faced with polls. Gross domestic product (GDP) grew faster than even the most optimistic forecast in the quarter of June by 8.2%, showed data released by the statistical office. GDP grew by 5.6% in the previous quarter and by 7.7% in the quarter of March.

This is the fastest growth since 9.3% in the period January-March 2016 and well above 6.7% growth noted by China for the same quarter. India thus retains its status as the world's fastest growing economy and is on track to overtake the UK to become the fifth largest after France last year. The government welcomed the figures, which came as they did after it had been at the end of the growing debate after the recent GDP data from the back series indicated that its predecessor had done better. "India's GDP for the first quarter of this year, with 8.2% growth in an environment of global unrest, represents the potential of New India," said Finance Minister Arun Jaitley. "Reforms and fiscal prudence are good for us, and India is witnessing an expansion of the neo-middle class." His views were repeated by ministerial colleagues and BJP president Amit Shah.


Economic generation
"The rising economic wealth of India means better prospects for the common man, who now has more resources and opportunities to realize his or her dreams," Shah testified.

Finance Secretary Hasmukh Adhia said 8.2% growth "clearly indicates that various structural reforms such as GST (tax on goods and services) have begun to give rich dividends". Department of Economic Affairs Secretary Subhash Chandra Garg called it a "V-shaped" recovery. An ET survey among economists had grown by 7.5-7.7%, although some had expected it to exceed the 8% mark. Former Minister of Finance P Chidambaram welcomed the high growth, but attributed it to the basic effect. "For the future, the basic effect will not be so favorable," he tweeted. "And when we reach Q3 and Q4, the growth rate can drop and the annual growth can be about the same as last year's."

GDP growth in the quarter last year was affected by disruptions due to the introduction of GST and the continuing impact of demonetization. Independent experts recognized a certain base effect, but largely acknowledged the growth rate to the economic upswing.

"There is an element of basic effect but the GDP figures point to a recovery under construction and strong production," said Saugata Bhattacharya, chief economist at Axis Bank.

Growth, measured by gross value added or gross value added, was 8% compared to 5.6% in the same period last year.

Multiple driver & # 39; s
The rapid expansion comes from a wide recovery. Consumption, both private and public, supported growth by 8.6% and 7.6%. High government spending in rural areas and robust business performance should support the spending that continues.

Gross fixed capital formation (GFCF), a proxy for investments, increased by 10.02% in the first quarter, mainly thanks to government spending with private investment to accelerate the pace. However, public spending on infrastructure and affordable housing and strong consumer demand have increased prospects for investment in infrastructure and production. "Investments will also continue to look up (driven by government-led efforts to build roads and houses), but a broad-based investment recovery under the leadership of the private sector is hampered by overcapacity, high leverage and political uncertainty," Crisil chief economist said. DK Joshi.

Production grew by 13.5% in the quarter, compared with a 1.8% decline in the same period last year. Construction grew by 8.7% against 1.8% in the previous year. Both sectors are high job generators.

The Reserve Bank of India has said that the acceleration of growth that started in the second half (October-March) of FY18 is expected to be consolidated in the current financial year and will be continued. RBI expects the economy to accelerate to 7.4% in FY19 from 6.7% a year ago. The latest growth number will be one of the factors that the monetary policy committee, which is strongly focused on restraining inflation, will weigh up when it meets in the first week of October the following year.

Support growth
Independent economists said that maintaining the pace takes some effort. "Maintaining GDP growth of more than 8% over the next few years would require significant traction in private investment and relentless implementation of reforms to increase productivity," Crisil said in a note.

A strong and sustained revival of household spending can help to eliminate private investment.

"Looking ahead, two important factors to watch out for are traction in private investment and the momentum in exports, especially the headwind on the outside can slightly ease the growth momentum," says Tushar Arora, senior economist at HDFC Bank. Higher oil prices, rising interest costs and a weakening rupee, as well as fiscal pressure are other risks for high growth.

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