India's economic growth accelerated to more than 8% in the final three months of last year, beating all economists' expectations in the months ahead of elections, even as one key figure suggested slowing momentum.
Gross domestic product (GDP) rose 8.4% year-on-year, the Statistics Ministry said on Thursday, supported by strong private investment and increased spending on services. GDP statistics for the previous two quarters have also been revised to over 8%.
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Analysts pointed to a sharp rise in taxes as a possible reason for the unexpected rise in GDP. The ministry's gross value added (GDP plus subsidies and taxes) figure slowed to 6.5% in the fourth quarter from a revised 7.7% in the previous three months.
Madhavi Arora, an economist at MK Financial Services, said the sharp divergence between the two indicators was “difficult to understand.” He said this likely reflected higher general government net indirect tax growth, likely due to lower subsidies.
Economists said GVA growth was a better measure of the economy's underlying momentum and cautioned against taking too optimistic a view of the GDP numbers.
However, financial markets did well in response to the statistics, with the benchmark Sensex index rising by 0.9%. The rupee has gone up.
The divergence has sparked debate over whether the Reserve Bank of India will remain cautious as it seeks to bring inflation down to its 4% target. The central bank has kept interest rates on hold for several months, maintaining a relatively hawkish policy stance, although some policy committee members argue that borrowing costs that are too high could stifle economic growth. ing.
What does Bloomberg Economics say…
Following the release of the RBI meeting minutes on February 22, we postponed our base rate cut scenario from June to August. However, we currently believe that the optimal policy response for central banks is to begin easing as early as April. — Abhishek Gupta, Indian economist
The government now expects growth to reach 7.6% in the fiscal year ending in March, higher than the 7.3% earlier forecast, putting India on track to remain the world's fastest-growing major economy. will be maintained. This has boosted sentiment in the domestic stock market and is also a boost for Prime Minister Narendra Modi ahead of elections likely to begin in April.
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Rahul Bajoria, economist at Barclays Bank, said: “Recent revisions to growth data show that India has already achieved an 8% growth economy and is accelerating, putting it in line with the rest of the world. '', he said in a message. “Investment figures suggest continued momentum in capital spending.”
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India's Chief Economic Advisor V Ananta Nageswaran said strong domestic demand and private investment will continue to drive growth. “India's economy ticks many of the right boxes,” he told reporters in New Delhi on Thursday.
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