India poised to win back fastest growing economy title from China


New Delhi, Feb 28: India might have regained the status of the world’s fastest-growing major economy in the October-December quarter, driven by higher government spending and a pick-up in manufacturing and services.
The median in a Reuters poll on annual growth in the December quarter was 6.9 percent, the best pace in 2017. Forecasts ranged from 6.4 percent to 7.3 percent.
The government will release GDP data around 5.30 today. If there was 6.9 percent growth, that would top China’s 6.8 percent annual pace for October-December. The last time India had a faster growth rate was in the final three months of 2016.
India’s expected improvement on its 6.3 percent growth in July-September comes as its manufacturing and services sector .
“After muted activity until September, signs of a pick-up in economic growth are starting to appear,” said Aditi Nayar, principal economist at ICRA, the India arm of rating agency Moody’s.
A strong gross domestic product reading could lift domestic shares, and boost the rupee, which has been Asia’s second weakest currency this year, losing about 1.6 percent against the dollar.
The GDP data could help Prime Minister Narendra Modi, who faces criticism over mounting bad loans of state banks and a $1.77 billion fraud at state lender Punjab National Bank , the biggest in the country’s banking history.
Last week, Modi told industrialists that his government, which got a “twin balance sheet” problem resulting from bad debt in banks and many businesses, was determined to put the economy back on a higher growth trajectory.
Modi is trying to accelerate growth through higher state spending including $32.36 billion for recapitalisation of state banks, beset with mounting bad loans of nearly $148 billion.
He has stepped up spending on infrastructure and welfare projects to boost growth ahead of national elections in 2019. This has widened the fiscal deficit for the current fiscal year, ending in March, to 3.5 percent of GDP, instead of the earlier projected 3.2 percent.
In November, Moody’s raised India’s investment grade rating one notch, the rating agency’s first upgrade in nearly 14 years.