India’s economy grew by 7.4pc in second quarte

Mumbai, November 30

India’s economy grew by 7.4 per cent year-on-year in the last quarter, official figures showed today, outperforming China and giving Prime Minister Narendra Modi a boost following a recent election drubbing.

Growth in the three months to the end of September quickened to 7.4 from seven per cent in the previous quarter, according to statistics ministry data, slightly ahead of analysts’ expectations.

India has now recorded three straight quarters of growth above seven per cent, performing better than its giant neighbour China on each occasion and leading the way for emerging markets with Russia and Brazil flagging.

“China was the leader of economic growth across the globe for two decades or so until 2014 but India will now be the pace-setter for the next two to three years at least,” said Analyst Sujan Hajra.

The figures for the second quarter of the financial year bettered China’s 6.9 per cent increase in gross domestic product (GDP) recorded for the same three months and reported by Beijing last month. They were also higher than the median forecast of 7.3 per cent in a survey of economists by Bloomberg News.

With fellow BRICS partner Russia contracting 4.1 per cent in the same period and Brazil predicted to shrink 4.2 per cent, India is a rare bright spot in a struggling world economy.

Modi has made boosting economic growth a priority since sweeping to power in a general election in May 2014 and India has posted 7.5 per cent, seven per cent and 7.4 per cent quarterly growth for the calendar year 2015.

But investors have raised concerns about the pace of promised economic reform needed to create jobs for India’s tens of millions of young people.

They are hoping Modi’s government will be able to reach agreement with opposition parties and push reforms through the current session of parliament, including one that paves the way for a long-awaited national sales tax.

The figures are a timely fillip for the PM and his ruling Bharatiya Janata Party party, which suffered a heavy defeat in a key election in the state of Bihar earlier this month.

The positive data also makes it likely that Reserve Bank of India Governor Raghuram Rajan will choose to keep interest rates unchanged when the central bank holds its monetary policy review meeting on Tuesday.

Rajan has already lopped 125 basis points off borrowing rates this year, bringing the benchmark repo rate to its lowest level in four years. Analysts expect Rajan to hold rates at 6.75 per cent following the meeting in Mumbai as he targets keeping inflation under control and waits for commercial banks to pass on the cuts.

Today’s numbers were the latest growth data to be released since government introduced a revised formula for calculating GDP that some analysts have criticised.

They showed manufacturing, financial, insurance, trade and transport grew over seven per cent during the quarter, while agriculture lagged at 2.2 per cent as did mining at 3.2 per cent.