India¡¯s economic growth accelerated to more than 8% in the final three months of last year, beating all forecasts by economists just months before an election.
Gross domestic product rose 8.4% from a year ago, the Statistics Ministry said Thursday, buoyed by strong private-sector investment and a pick-up in services spending. GDP figures for the previous two quarter¡¯s were revised to above 8% as well.
The government now predicts growth will reach 7.6% in the fiscal year through March, higher than an earlier projection of 7.3%, keeping India on track to remain the fastest-expanding major economy in the world. That¡¯s buoyed sentiment in the nation¡¯s stock market and gives Indian Prime Minister Narendra Modi a boost as he contests elections likely to kick off in April.
¡°The revisions in the recent growth data show India is already an 8% growth economy and accelerating, which sets it apart from the rest of the world,¡± Rahul Bajoria, an economist with Barclays Bank, said by message. ¡°Investment numbers suggest an ongoing pickup in capex momentum.¡±
Analysts pointed to a surge in taxes as a possible reason for the unexpected jump in GDP. The ministry¡¯s figures for gross value added ¡ª which is GDP excluding taxes and subsidies ¡ª showed a slowdown to 6.5% in the fourth quarter from a revised 7.7% in the previous three months.
The wide gap between GDP and GVA ¡°followed from a surge in the growth of net indirect taxes to a six-quarter high 32% in this quarter, which is unlikely to be sustainable,¡± said Aditi Nayar, an economist with ICRA, said in an email. She added that GVA growth was a more appropriate measure of underlying momentum in the economy.
V Anantha Nageswaran, India¡¯s chief economic adviser, said strong domestic demand and private investments will continue to drive growth. ¡°The Indian economy is ticking many boxes in the right manner,¡± he told reporters in New Delhi on Thursday.
Relatively strong growth may keep the Reserve Bank of India on guard as it tries to bring inflation down to its 4% target. The central bank has kept interest rates unchanged and stuck to a relatively hawkish policy stance for several months, although some policy committee members argue that keeping borrowing costs too high could stifle economic growth.
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