Daily Management Review

Increased Consumption Drives The Indian Economy To Potentially Its Fastest Growth In A Year


02/28/2018




Increased Consumption Drives The Indian Economy To Potentially Its Fastest Growth In A Year
The October to December growth figures from India suggest that the economy has the potential to further its recovery. 
 
For the three months ended December, the GDP of the country had grown at 6.9 per cent year-on-year according to a pool of economists conducted by Reuters.
 
The country would achieve the fastest growth in a quarter in the year of 2017 if the expectation of economists come true. The one time fastest growing major economy had managed to achieve only 6.3 per cent GDP growth in the July t September quarter. India follows a fiscal year that begins in April and end sin March next year. 
 
Higher exports and enhanced consumption were the potential drivers of r the growth in the December quarter according to market watchers. They said that the slow growth in the agriculture sector in the aforesaid quarter was partly of set by the continued spending of the Indian household as the rise in inflation had a very minimal impact throughout the quarter.
 
"From an expenditure perspective, consumption and external demand picked up further while private capex remained sluggish," economists at Morgan Stanley wrote in a recent note. There was a 7 per cent on-year growth in the GDP in the December quarter which was a little more than what the markets had been expecting, noted the investment bank.
 
While there was a slowdown in the agriculture sector, there was a likely acceleration in the growth in industry and services sector, the market analysts said. The economists added that in the quarter, there had been a likely enhancement in corporate revenue trends. 
 
After the launch of the goods and services tax last year, there had bene a lull in the factory activity which had potentially recovered in the December quarter and the growth and rebound  in the economy was further aided by a rise in industrial production, said economists at Singapore's DBS bank.
 
Rising output and new orders in December drove growth in the factory activity in the economy to touch its fastest pace in the last five years. On the other hand, there was a likely 7.1 per cent on-year rise in the industrial output for the country which is more than what the markets  had forecast at 6.2 per cent.
 
"Net external trade is expected to benefit from firmer service sector receipts, even if the merchandise deficit is widened on a bigger oil bill," the DBS economists added.
 
Increase in global crude prices has put the Indian economy in a less favorable condition in recent months as the country is one of the largest importers of crude oil in the world.
 
There could be headwinds to growth for the economy in 2018 because of inflations pressure, a wider trade deficit and higher oil prices, said a note by analysts at Mizuho Bank.
 
"What this means is that straight-line projections of India's growth restoration to "Modi magic" rates of 8-8.5 percent will be misguided," the analysts said.
 
"Instead, a fairly bumpy ride in the 7-8 percent growth range for 2018 could be due as high oil prices, lingering banking woes and political distractions appear," they added.
 
(Source:www.cnbc.com)






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