India records 7.4% growth in Q2; outpaces China

Helped by pick up in manufacturing, India's economy grew by 7.4 per cent in July-September, outpacing China to become the fastest growing major economy, supporting the case for RBI to keep interest rates steady.
While the gross domestic product or GDP of Asia's third-largest economy expanded 7.4 per cent in Q2 from 7 per cent in the previous quarter, growth rate of eight core infrastructure industries slowed to 3.2 per cent in October.
GDP growth rate, however, was lower than 8.4 per cent recorded in the July-September quarter of the previous fiscal.
Amid global headwinds, Chinese economy has slowed down while other emerging economies of Brazil to Russia are contracting. China expanded by 6.9 per cent growth in July-September while Russia contracted by 4.1 per cent and Brazil is forecast to shrink by 4.2 per cent.

The world-beating pace, most analyst said, supported case for the Reserve Bank of India (RBI) Governor Raghuram Rajan to hold rates at tomorrow's bi-monthly monetary policy review.
Manufacturing output rose 9.3 per cent in Q2 and financial services 9.7 per cent. Electricity and gas production rose 6.7 per cent while the construction sector expanded 2.6 per cent.

Buoyed by Q2 numbers, Finance Minister Arun Jaitley said the GDP in current fiscal will be better than the 7.3 per cent growth rate recorded in last financial year and improve further in the subsequent years.
The "significant" 9.3 per cent growth in manufacturing sector was despite adverse global situation. "I think the Q2 figures give us a sense of satisfaction... We expect growth this year to be better than last year and even better the next year," he said.

Fiscal deficit in the first seven months of the fiscal too
showed an improved. At the end of October, it was at Rs 4.11 lakh crore, or 74 per cent, of the Budget estimate for the whole year as against 89.6 per cent a year ago.
As regards the GDP data, Economic Affairs Secretary Shaktikanta Das tweeted the second quarter growth at 7.4 per cent strengthens positive outlook for current year. "7.5 per cent for the year looks achievable".
Manufacturing growth at 9.3 per cent is an important growth driver, he said adding "will continue to work for bigger success of Make in India".

According to CII Director General Chandrajit Banerjee, the GDP growth at "7.4 per cent in the second quarter of FY16 indicates that the recovery has gained strength, as we had anticipated."
He further said, "...Construction is one sector where the growth rate has fallen significantly. Policy measures therefore need to focus on a revival in project execution in manufacturing, real estate and infrastructure."
According to Deloitte the numbers "portrayed an economy which was gradually recovering.
"On the flipside agriculture growth remained muted while growth in services was mixed. Financial services showed a slight improvement while the category of trade, hotels and communication moderated from the previous quarter."

The data also revealed Gross Value Added (GVA), a new concept introduced by CSO to measure the economic activity, also accelerated during the second quarter to 7.4 per cent, from 7.1 per cent in the April-June period.
It said the economic activities which registered growth of over 7 per cent in the second quarter are trade, hotels and transport & communication and services related to broadcasting, financial, insurance, real estate and professional services and manufacturing.
The government had projected a growth rate of 8.1-8.5 per cent for the current fiscal.
The data showed that the manufacturing sector GVA at constant prices (2011-12) rose 9.3 per cent in July-September quarter as against 7.9 per cent in the year-ago period.

The output of mining and quarrying sector rose to 3.2 per cent, from 1.4 per cent a year ago.
The trade, hotel, transport, communication and services related to broadcasting segment grew at 10.6 per cent in the quarter under review compared to 8.9 per cent year ago.
Financial, real estate and professional services growth shrank to 9.7 per cent against 13.5 per cent a year earlier.