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Last updated: 06 Mar, 2018  

GDP.Q3.9.Thmb.jpg GDP surprise

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Bikky Khosla | 06 Mar, 2018

It was unexpected but obviously pleasant. Gross Domestic Product (GDP) of the Indian economy grew 7.2 percent in the October-December quarter of 2017-18, the fastest in five quarters. With these robust growth, the economy has regained the world's fastest growing major economy tag. Amid criticism over the Rs 12,600-crore fraud in PNB, it must also came as a big relief to the government as well. Most importantly, the figures signal that the economy is on the recovery track.

There are plenty of positive takeaways from the third quarter GDP figures. They show strong manufacturing growth. The sector grew 8.1 percent in the period and is projected to expand at 5.1 percent for the full year, compared with 7.9 percent growth in the previous year. Also, strong growth in capital formation is a good sign. Its growth accelerated from 6.9 percent in second quarter to 12 percent in third quarter, signalling revival in investment. Also, a healthy 6.8 percent growth in the construction sector adds to the positivity.

Additionally, robust sales of commercial vehicles, sharp rise in cement production and higher capital goods output support the view that investment activity may be finally picking up, albeit gradually. There are some concerns like low GVA growth and slowing consumer spending. Experts also point to high contribution of the government sector which is why fiscal deficit is ballooning. But there are enough signs that the economy is growing even without government support. Now, the government should step in to help private investment build on the initial success.

Meanwhile, the Nikkei India Services Purchasing Managers' Index showed that the service sector's output contracted in February, the first time since November, due to rising price pressure and demand decline. The index slid to 47.8 in February--the lowest since August--from 51.7 in January. This is not a good sign and the trend needs to be reversed urgently. The sector contributes 60 percent to the economy, and at a time when job creation has posed the biggest challenge to the government, the sector demands attention.

I invite your opinions.

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