The Indian economy grew at the fastest rate in over two years in the quarter ending on June. The Narendra Modi government-led reforms, combined with a conducive investment environment and a resilient manufacturing sector, steered India’s economy to growth rate of 5.7%, its fastest pace in two and a half years.
According to the data released by the Central Statistics Office on August 29 the country’s gross domestic product (GDP) grew an annual 5.7% in the June quarter, significantly higher the previous quarter’s 4.6% expansion and 4.7% growth a year earlier.
Unlike the previous two years, when India’s GDP grew at less than 5 %, the government is confident that better days lie ahead.
While agricultural output grew at 3.8 percent, over 4 percent higher than a year ago, electricity generation grew by 10.2 percent. The manufacturing sector, which accounts for 15 percent of India’s economy, grew by 3.5 percent this quarter. The figures also show that sales of domestic vehicles have risen for the third consecutive month.
But economist have sounded out a note of caution over reading too much into reports of this quarter. They also warn that given the risks relating to slow recovery of global economy, poor monsoons, and geo-political turmoil growth rates could slow.
“GDP growth has largely been lifted due to a weak base and partly due to improved sentiments following a decisive election mandate,” said DK Joshi, chief economist at ratings agency Crisil, adding, “Going ahead agricultural growth will crimp as rains have disappointed. But industry and services momentum can deliver 5.5% growth in 2014-15. It is important to resolve coal mining issues to sustain double electricity growth seen in Q1,” he said.
India’s finance ministry said the performance of the economy in the first quarter was on xpected lines and struck an optimistic note for improvement in the months ahead.
“With improvement witnessed in some important sectors including manufacturing as well as in the performance of exports, along with the measures taken by the government, the economy can be expected to show further improvement in the remaining part of the year,” said a finance ministry statement.
India Inc. has cheered the news, and is expecting more. “In order to convert the first signs of revival into a full-fledged recovery, it is necessary that the government continues on its path of implementing the reforms agenda which would restart the investment cycle and revive demand in the economy,” said Chandrajit Banerjee, director general at the Confederation of Indian Industry.
Before leaving for his much-awaited visit to Japan, India’s Prime Minister Narendra Modi said his government has within 100 days in office steered the economy out of a “difficult situation” and brought stability.
“I think we have crossed the difficult situation that the country was facing. Within the first 100 days of this government, we have achieved stability and stopped the continued reversals that the country was facing. “We have to move ahead now on the runway; way; I am confident that, very soon, we will attain even greater heights,” added Modi.
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