India’s economy will grow 7.6% in 2015-16, faster than last year | business | Hindustan Times
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India’s economy will grow 7.6% in 2015-16, faster than last year

India will likely grow at 7.6% in 2015-16, faster than the previous year’s 7.2% but nearly one percentage point lower than earlier forecasts, government data showed on Friday, mirroring the possible impact of two successive drought years and plunging exports.

business Updated: Feb 08, 2016 21:38 IST
HT Correspondent
Indian economy grew 7.3% in the third quarter ended December 31, 2015 .
Indian economy grew 7.3% in the third quarter ended December 31, 2015 . (AFP Photo)

The Indian economy will likely grow at 7.6% in 2015-16, faster than the previous year’s 7.2% but nearly one percentage point lower than earlier forecasts, government data showed on Monday, mirroring the possible impact of two successive drought years and plunging exports.

The country’s “real” or inflation-adjusted gross domestic product (GDP) — a measure of the value of all goods and services produced — also grew at a slower 7.3% during October to December from 7.4% in the previous three months, data released by the Central Statistics Office (CSO) showed.

India, however, will remain the world’s fastest growing major economy outpacing China’s 6.9% expansion in 2015, its slowest since 1990 hit by a crippling industrial slowdown.

“The direction of the numbers is very positive. The policy and reform measures the government has undertaken in last one-and-a-half years are beginning to show results,” economic affairs secretary Shaktikanta Das said.

The latest data comes barely three weeks before finance minister Arun Jaitley presents the annual budget for 2016-17 on February 29 amid heightened anticipation that he would announce measures to boost investment and create jobs.

Surprisingly, growth for the April-June quarter was marked up to 7.6% from a provisional 7% estimated earlier.

According to advance national income estimates, the manufacturing sector is estimated to grow at 9.5% from 5.5% in the previous year, although some experts say data from other sources such as household spendings, corporate earnings and tax collections and sales of goods and services are weak and do not point towards an industrial turnaround.

In January last year, the CSO released a new formula to calculate national income that covers a raft of activities from farm-level livestock to mega infrastructure projects.

The new methodology, which has changed the “base year” from 2004-05 to 2011-12, has stumped both experts and the uninitiated. While the base year of the national accounts is changed periodically to factor in structural and price changes in the economy, it is the new formula that has baffled analysts.

“The surprisingly robust pickup in manufacturing growth in the third quarter (October to December) relative to the second quarter (July to September) belies the trends available from various high frequency volume-based indicators, including the index of industrial production (factory output) for October-November 2015,” said Aditi Nayar, senior economist at ICRA Limited, a credit rating and research firm.

According to the government’s own mid-year economic analysis tabled in Parliament in December, power, fertilisers, and car production have been surging. In contrast, commodities such as steel, iron, aluminium, and cement are doing less well.

Growth in capital goods imports, a proxy for investment activity, has decelerated sharply from about 12% in April 2015 to barely positive territory.