India’s economy picking up
NEW DELHI — Figures out Friday are expected to show India’s faltering economy grew at its fastest pace in over two years in the first financial quarter, as the election of a new right-wing government spurred confidence.
India has been mired in its longest spell of sub five-percent growth in a quarter-century.
But analysts say the economy appears to be gaining steam after the Bharatiya Janata Party (BJP)’s election victory, powered by increased consumer and investor confidence.
Economists surveyed by India’s Economic Times newspaper expect the official data will show a 5.8-percent rise in the gross domestic product of Asia’s third-largest economy in the three months to the end of June.
That would be a faster than the 4.6-percent expansion logged in the previous three months, and represent the best performance since the January-to-March quarter in 2012.
“Confidence has lifted with the election result,” said Glenn Levine, senior economist at Moody’s Analytics, part of global ratings agency Moody’s Corp.
“Industrial production is growing at a solid pace and should be mirrored in the cyclical upturn in GDP.”
Prime Minister Narendra Modi, who took power in May, is perceived as more business friendly than the previous left-leaning Congress government.
In July, the finance ministry forecast growth of 5.4-to-5.9 percent for the financial year to March 31, 2015.
In the past two years, growth slowed to around half of the near double-digit levels seen a few years ago, hit by high interest rates to curb stubborn inflation, a weaker global economic backdrop and a fall in foreign investment as corruption scandals embroiled the Congress government.
Economists say India needs at least eight-to-nine percent percent growth to create jobs for a ballooning youth population.
To help spur growth, Modi has pledged to hasten introduction of a long-awaited goods-and-services tax to replace India’s patchwork of levies that make business transactions more complex and costly.
Modi has also been seeking to jumpstart India’s investment pipeline by easing a cumbersome bureaucratic approval process but many big-ticket industrial projects remain stalled by environmental concerns and other factors.