New Delhi: India’s economy sustained strong growth momentum for a second straight quarter in April-June, but the depreciating rupee and monetary tightening pose risks for coming periods.

At 8.2% growth, it tops China’s 6.7% in the second quarter. For the first three months of 2018, India reported 7.7 annual growth, the fastest in nearly two years.

India’s $2.6 trillion economy surpassed France’s in 2017 to be the world’s sixth largest, and it was not far before it overtook the United Kingdom, according to World Bank data.

On Wednesday, India’s central bank said economic growth was expected to accelerate to 7.4% in the current fiscal year that began in April, from 6.7% the previous one, despite risks posed by higher oil prices and global trade tensions.

SUSTAINABLE GAINS?

Sameer Narang, chief economist at Bank of Baroda , said a recent uptick in investments and manufacturing “is likely to sustain as order books have increased on account of infrastructure, affordable housing and exports". But he said economic growth could cool to about 7.2% in October-March.

The Reserve Bank of India has raised its benchmark repo rate by a total of 50 basis points at its past two meetings, to 6.5% , to tame inflation that has remained above its medium-term target of 4% for the last nine months.

In July, retail inflation eased to 4.17% from a year earlier, but is projected to remain around 4.8% in the second half of the fiscal year.

The rupee has weakened nearly 10% against the dollar this year and is the worst performing currency in Asia.

Credit ratings agency Moody’s has warned about rising pressure of higher oil prices and interest rates on government finances and India’s current account.

Narang of Bank of Baroda said the rupee depreciation “could lead to higher import bills and a fall in consumption of non-oil products," though he added that a declining rupee would support exports.

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