India Outpaces China as GDP Rises by 7.5% in Q4

March quarter gross domestic product or GDP data shows that India is the fastest-growing major economy in the world. Manufacturing sector output, a big focus area for Prime Minister Narendra, jumped sharply in the March quarter. However, agricultural output declined between January and March.

Here’s your 10-point cheat-sheet to this story:

1) India’s gross domestic product grew by 7.5 per cent in the fiscal fourth quarter, beating estimates. A Reuters poll of economists had expected GDP to grow by 7.3 per cent in the January-March quarter.

2) The latest GDP number puts India’s economic growth ahead of China, which grew by 7 per cent in the March quarter.

3) For the full year, GDP grew at 7.3 per cent, higher than 6.9 per cent growth the economy clocked in 2013-14, and close to the government’s advance estimates of 7.4 per cent.

4) Manufacturing output grew by 8.4 per cent in the quarter to March, but farming retreated by 1.4 per cent. PM Modi has promoted a campaign to ‘Make in India’ and encourage labour-intensive manufacturing, but has faced opposition in rural areas where the farm economy has suffered lower prices.

5) GDP data for previous quarters were revised. First quarter GDP growth was revised upwards to 6.7 per cent; second was revised upwards to 8.4 per cent. However, third quarter GDP was revised downwards from 7.5 per cent to 6.6 per cent.

6) The downward revision in Q3 suggests some loss of momentum began in the second half of FY2015, said Shubhada Rao, chief economist of Yes Bank.

7) The GDP data for fiscal 2014-15 is based on the new series and takes into account the gross value added into the economy. Many analysts point that the GDP data should not be taken at face value. “The big picture is that the official GDP data are overstating the strength of the economy, most probably by a significant margin,” said Shilan Shah of Capital Economics.

8) Analysts say domestic economy continues to be sluggish despite robust headline growth. Industrial activity is weak, corporate earnings are under pressure and bank credit recovery remains elusive.

9) Economists say there is a possibility of deceleration in growth before the economy picks up meaningfully. There are concerns that in the current fiscal year, the economy may not be able to grow by 8 – 8.5 per cent promised by the government.

10) The industry wants the Reserve Bank to cut interest rates on June 2, when it meets to discuss its monetary policy. The RBI has so far cut repo rate by 50 basis points in two installments in January and February 2015. Both the rate cuts happened outside the policy meeting.

(With inputs from Reuters)