Helped by pick up in manufacturing, India’s economy grew by 7.4 % in July-September, outpacing China to become the fastest growing major economy, supporting the case for RBI to keep interest rates steady.
While the gross domestic product or GDP of Asia’s third-largest economy expanded 7.4 % in Q2 from 7 % in the previous quarter, growth rate of eight core infrastructure industries slowed to 3.2 % in October.
GDP growth rate, however, was lower than 8.4 % recorded in the July-September quarter of the previous fiscal.
Amid global headwinds, Chinese economy has slowed down while other emerging economies of Brazil to Russia are contracting. China expanded by 6.9 % growth in July-September while Russia contracted by 4.1 % and Brazil is forecast to shrink by 4.2 %.
The world-beating pace, most analyst said, supported case for the Reserve Bank of India (RBI) Governor Raghuram Rajan to hold rates at tomorrow’s bi-monthly monetary policy review.
Manufacturing output rose 9.3 % in Q2 and financial services 9.7 %. Electricity and gas production rose 6.7 % while the construction sector expanded 2.6 %.
Buoyed by Q2 numbers, Finance Minister Arun Jaitley said the GDP in current fiscal will be better than the 7.3 % growth rate recorded in last financial year and improve further in the subsequent years.
The “significant” 9.3 % growth in manufacturing sector was despite adverse global situation. “I think the Q2 figures give us a sense of satisfaction… We expect growth this year to be better than last year and even better the next year,” he said.
Growth is mostly driven by public spending than private consumption. Investments grew 6.8 % in Q2 compared with 4.9 % in April-June.