Positive Signals

India's growth is projected to pick up pace in the current fiscal and consolidate the country's position as the world's fastest-expanding major economy despite a slight moderation in the third quarter, helping the Modi regime deflect criticism that it's not doing enough to accelerate recovery .
FY16 GDP is projected to grow 7.6% compared with 7.2% last year. The faster growth is largely because of an upward revision in first-quarter growth that showed the economy lost steam in the third quarter to 7.3%.
First-quarter growth was revised to 7.6% from 7% while that for the second quarter was restated to 7.7% compared with 7.4% estimated earlier. The government had earlier said such revisions would be possible because the initial quarterly estimates had not factored in buoyant indirect tax collections.
China's economy grew 6.8% in the December quarter, putting India well ahead at 7.3%.
To be sure, doubts about the new GDP series persist with economists pointing out that it's not consistent with high-speed economic indicators that reflect weak exports, sluggish railway freight and cement production, besides low single-digit growth in the country's industrial production.
Gross value added rose 7.3% in FY16 compared with 7.1% in FY15.
Industry called for more measures to consolidate the recovery.
Growth was driven by robust manufacturing, which is expected to post a 9.5% growth in GVA in the current fiscal, up from 5.5% last year. Agriculture will be a drag again, reporting only a 1.1% rise even on a 0.2% contraction last year.
The services sector is expected to perform in line with last year.
On the expenditure side, the key driver was private spending with a projected expansion of 7.6% compared with 6.2% last year. Investments, as measured by gross fixed capital formation, are set to grow 5.3%, only marginally higher than 4.9% last year, capturing the problem the government has faced in reviving private investment. The share of investment in GDP is down to 29.7% in financial year 2015-16 from 31% in fiscal 2014-15. Global headwinds will also make India's task of climbing to higher growth difficult.
The International Monetary Fund estimates world growth at 3.4% in 2016, down from an October forecast of 3.6% while the World Bank cut its prediction to 2.9% from 3.3% it expected last June.

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