Expected recovery in Indian economy
The Indian economy has expectedly bounced back from the three-year low it hit in the June quarter. The two main measures of economic activity—gross domestic product (GDP) and gross value added (GVA)—grew faster in the September quarter than in the previous one.
The new output data shows that almost all the economic growth has come from the private sector, unlike the heavy government support to the economy in the first three months of the current fiscal year. This is welcome since the government has already used most of its budgeted fiscal ammunition to support economic activity during the twin shocks from demonetisation and the transition to the goods and services tax. The sharp increase in industrial production is especially important in this context.
What now? The modest recovery should not take away from the fact that economic growth is still below potential, especially at a time when the global economy seems to have picked up momentum. The economic recovery needs to sustain for a few more quarters before we can say that Indian growth is back on track.
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