India: GDP in fast lane ahead of polls

  • India’s economy is forecast to grow at its fastest pace in three years in FY19, recovering from the disruption caused by demonetisation and the rollout of the goods and services tax (GST), marking the end of the government’s five-year term on a positive note ahead of the general elections. India will thus retain its ranking as the world’s fastest-growing economy, the government said.
  • Gross domestic product (GDP) is forecast to grow 7.2% in FY19, up from 6.7% in FY18, according to the first, full-fiscal-year estimate released by the Central Statistics Office (CSO). Gross value added (GVA) growth is seen at 7% against 6.5% in FY18, according to the data released on 7 Jan 19.
  • The growth forecast is slightly lower than 7.4% estimated by the Reserve Bank of India (RBI). The International Monetary Fund (IMF) has forecast 7.3% growth in FY18 and 7.4% in FY19.
  • The Indian economy grew 7.6% in 1HFY18, suggesting a moderation in 2HFY18 with liquidity constraints and high crude prices a drag in 4Q18. Growth had declined to a below-expectation 7.1% in 3Q18 from 8.2% in 2Q18.
  • The slowing global economy has also contributed marginally. The decline in crude prices, the strengthening rupee and low inflation have brightened the outlook in the new year.
  • The higher economic growth rides on a strong recovery in investments. Gross fixed capital formation is projected to be up 12.2% in FY19 against 7.6% in FY18.
  • Lacklustre private investment had been drag on the economy for a while, a gap the government had tried to fill with higher public investment. The RBI had also noted a nascent recovery in investment, though some independent experts are not convinced.
  • CSO sees manufacturing sector growth at 8.3% compared with 5.7% in FY18 while the construction sector growth is seen at 8.9%, up from 5.7% in FY18. Farm sector growth is projected at 3.8%, slightly ahead of 3.4% in FY18.
  • GDP growth for 4Q18 will be released on 28 Feb 19, along with second advanced estimates for FY19.

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