India Regains Fastest Growing Economy Tag From China as GDP Growth Rises to 7.2%

New Delhi: The Indian economy grew at 7.2 per cent in the October-December quarter, government data showed on Wednesday, beating expectations by riding on higher government spending and a pickup in the manufacturing sector.

The data is also a booster shot for Prime Minister Narendra Modi, who faces mounting criticism over bad loans and a Rs 12,700 crore fraud at state-run Punjab National Bank, the biggest fraud in the country’s banking history.

The latest data shows that the economy in this quarter grew fastest in the fiscal year 2017-18, signaling a revival after emerging from the negative effects of the twin decisions of demonetization and Goods and Services Tax.

The GDP growth rate came in above expectation as a Reuters survey of 35 economists predicted the data to come at 6.9 per cent.

A 7.2 per cent growth rate also means that India has regained the status of the fastest growing economy as it topped China's 6.8 per cent pace for October-December. The last time India had a faster growth rate was in the final three months of 2016.

A strong gross domestic product reading could lift domestic shares, and boost the rupee, which has been Asia's second weakest currency this year, losing about 1.6 percent against the dollar.

The economy is expected to grow at 6.6 per cent in the current fiscal ending March 31, as per the second advanced estimates of the Central Statistics Office (CSO), compared to 7.1 per cent in 2016-17. The earlier estimate was 6.5 per cent.

The growth for the second quarter (July-September) has been revised upwards to 6.5 per cent, from 6.3 per cent estimated earlier by the CSO. The previous high was recorded at 7.5 per cent in the July-September quarter of 2016-17.

The CSO said that the real GDP or Gross Domestic Product (GDP) at constant (2011-12) prices in 2017-18 is likely to be Rs 130.04 lakh crore, as against the first revised estimate for 2016-17 of Rs 121.96 lakh crore, released on January 31.

The growth in GDP during 2017-18 is estimated at 6.6 per cent as compared to the growth rate of 7.1 percent in 2016-17, it added. The gross valued added (GVA) for manufacturing in the quarter under review grew at 8.9 per cent higher than 6.9 per cent in the previous quarter.

Similarly, the farm sector GVA grew at 4.1 per cent compared to 2.7 per cent in the previous quarter. The construction sector recorded a growth of 6.8 per cent, higher than 2.8 per cent in previous quarter. The services segment including financial services grew at rate of 6.7 per cent up from 6.4 per cent in previous quarter.