The economy seems to be coming back on track with an impressive 7.7% growth in the March quarter, experts said on Thursday, expecting the trend to improve further in the current fiscal.
Robust performance by manufacturing, construction and service sectors and good farm output pushed the India's January-March 2018 GDP growth to a seven-quarter high of 7.7 per cent, helping it retain the fastest growing major economy tag.
The rebound in growth reinforces that the economy is back on track and is set for a strong recovery after the period of disruptions sparked by demonetisation and GST implementation, industry body CII said in a statement.
The significant expansion in GDP print has sprung a positive surprise by notching up an impressive growth of 7.7 per cent in the fourth quarter of 2017-18 and "marginally overshoots the advance estimates of GDP released earlier this year", said CII Director General Chandrajit Banerjee.
The gross domestic product (GDP) in the March quarter remained higher than market expectations -- the highest in seven quarters -- even as the overall growth of 6.7 per cent during the year was the lowest in last four fiscal years, Devendra Pant, Chief Economist at India Ratings, said.
"Worrying trend is lowest core GVA (gross value added) growth (GVA excluding agriculture and public administration, defense and other services), it grew only 6.5 per cent in FY18 (previous low: 6.6 per cent in 2013-14). However, increasing quarterly year on year growth of manufacturing and construction throughout 2017-18 is encouraging. We believe this trend to improve further in FY19," Pant said.
Industry chamber Assocham said the GDP estimates in March quarter are in line with the expectations and indicates significant growth recovery.
"While Indian economy is in cyclical recovery led by both investment and consumption, however, higher oil prices and tighter financial conditions will weigh on the pace of acceleration," Assocham secretary general D S Rawat said.
"As India imports over two-thirds of its crude requirement, any surge in crude prices has the potential to upset growth projection," he added.
The industry body has emphasised the need to sustain the growth momentum, while suggest the policy makers to take steps to revive private investments following the recent push to accelerate infrastructure spending as well as to improve the business climate and (eventually) less leveraged corporate and banks' balance sheets.
Aditi Nayar, Principal Economist, ICRA, said, "We expect the economic growth to consolidate above 7 per cent in 2018-19, on the back of the continued benefits of the implementation of the GST, healthy consumption demand, government expenditure, and a back-ended pickup in investment activity. "However, the ability of the public sector banks to support lending growth, the risk of monetary tightening and trade wars, and the impact of higher crude oil prices on purchasing power of consumers and corporate earnings have emerged as risks." The ratings firms expects the GDP and GVA growth to improve to
7.1 per cent and 7 per cent, respectively, in 2018-19, from 6.7 per cent and 6.5 per cent a year ago.
Ranen Banerjee, Partner and Leader - Public Finance and Economics, PwC India, said the high growth rate reported in quarter is on expected lines and that the rural demand is indicating a revival.
"We should however be wary of the headwinds the economy faces in the coming quarters from higher crude prices feeding into inflation and rising inflation expectations. We hope the Monetary Policy Committee would not press the panic button that could create further friction on growth rate and would continue to hold on to the interest rates," he said.
Banerjee of CII expect fresh investments as well as capacity creation in current fiscal as the demand cycle improves further based on tailwinds created by factors such as prognosis of a good monsoon, increased government spending and favourable global growth.
"Moreover, a slew of game-changing reforms such as GST, bankruptcy code, and steps to improve ease of doing business would strengthen the growth drivers, going forward," CII said.
