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India's annual growth slows to 6.7%, Q4 picks up

By AFP
media Healthy growth in the farming, manufacturing and construction sectors helped fuel the expansion AFP/File

India's growth expanded to 7.7 percent in the fourth quarter of the financial year, official data showed Thursday, as Asia's third-largest economy continues to recover from the fallout of several disruptive economic initiatives.

Figures from the Central Statistics Office showed GDP growth improved from the last quarter, which expanded at 7.2 percent, reinforcing India's status as one of the world's fastest growing economies.

The result exceeded the expectations of a survey of economists by Bloomberg, who predicted India's growth for January to March 2018 at 7.4 percent.

The data showed a slide in full-year expansion, however, to 6.7 percent for the fiscal year ended March 31, compared with 7.1 percent in the last corresponding period.

Analysts said the healthy Q4 figures showed that the economy had recovered from a slump, which followed a shock decision to scrap 86 percent of currency notes in late 2016 and the introduction of a new nationwide tax last year.

"The after-effects of both GST (goods and services tax) and demonetisation seem to be fading off. We can expect the GDP figures to stay above 7 percent for the next few quarters," Ashutosh Datar, senior economist at Mumbai-based IIFL, told AFP.

India's quarterly growth slowed to as low as 5.7 percent in spring last year as the economy reeled from the cash ban and readied itself for GST, which aimed to create a single market in India.

The economy has been slowly getting back on its feet however, recording quarterly growth of 6.5 percent for the three months to September 2017 before the Q3 figures of 7.2 percent in February.

- Oil prices -

Healthy growth in the farming, manufacturing and construction sectors combined with a boost in consumer spending to fuel the expansion in Q4 growth, Thursday's statistics showed.

However, rising oil prices, a weakening rupee, and billions of dollars of debt in the form of bad bank loans means the Indian economy will face headwinds in the near future, analysts warned.

"The Indian economy will face challenges in the form of non-performing assets and bad loans in the banking sector.

"Global oil prices will affect inflation and thereby challenge the central bank to hike interest rates," said Datar, referring to next month's monetary policy meeting of the Reserve Bank of India.

India imports nearly 80 percent of its oil and fluctuations in crude oil prices seriously affect the Indian economy.

Prices of petrol and diesel have surged to record highs in India as the international crude oil prices hit $80 per barrel, pressuring the rupee and dubbing it Asia's worst performing currency.

Moody's ratings agency on Wednesday cut its growth forecast to 7.3 percent from 7.5 percent for fiscal year 2018-19, owing to the surging cost of crude.

Goldman Sachs reduced its growth projection for the year ending March 2019 to 7.6 percent from 8 percent, citing the mountain of bad loans crippling India's state-owned lenders.

 
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