ETFs To Buy As India Reclaims Tag Of Fastest-Growing Economy

The Indian economy is coming back in the picture. Latest data released by the statistics office reveal that the economy grew at its fastest pace in five quarters and might be recovering from the two setbacks faced, demonetization of high currency notes and the Goods and Service Tax (GST).

A strong rebound in the agriculture, manufacturing and industrial sectors helped the economy stage a comeback. “Robust growth in manufacturing and significant acceleration in construction mark a turnaround in the country’s economic growth momentum,” the finance ministry said.

Into the Headlines

The Central Statistical Office (CSO) reported that the Indian economy grew 7.2% in the December quarter of 2017 compared with an upwardly revised 6.5% expansion in the previous quarter. The more preferred Gross Value Added (GVA) increased 6.7% in the quarter compared with the upwardly revised 6.2% in the previous quarter. GVA is preferred over GDP as it excludes the impact of indirect taxes and subsidies.

The strong expansion bears testimony to the fact that the government’s reforms are finally impacting the economy positively. To a certain extent, the strength in these numbers can be attributed to the lower base effect, as the slowdown owing to demonetization and GST weighed on the Indian economy.

Manufacturing grew 8.1% compared with 6.9% in the previous quarter while agriculture grew 4.1%, compared with 2.7% in the previous quarter. Construction grew 6.8%, up from 2.8% sequentially.

Coming to Gross Fixed Capital Formation, a proxy for private investment was up 12% in the third quarter compared with 8.7% in the same period last year. However, the decline in private consumption is bothering investors.

“A 12 per cent growth in fixed capital formation pulled up GDP growth, the need of the hour is how we can nurture this budding investment revival with conducive policies. However, an area of concern is decline in private consumption growth to 5.6 per cent in Q3 of FY18 from 6.6 per cent in Q2 in FY18,” India Ratings’ Chief Economist D K Pant said.