India’s economic growth forecast slowed in the three months to the end of December, but GDP growth for the whole financial year has been revised upwards to 7.6 per cent, official figures released on Monday showed.
Annual growth in the third quarter of the April to March financial year came in at 7.3 per cent on the same period a year earlier, down from an estimated 7.7 per cent in the previous quarter. The latest quarterly data was dragged down by agriculture output.
However, these figures suggest that India is still outpacing other major economies, including China.
The numbers have come into sharp focus ahead of India’s finance minister Arun Jaitley’s presentation of the annual budget on February 29, and amid concerns about how accurately the figures reflect the reality on the ground.
Analysts have expressed doubts about India’s GDP data after the methodology of calculating it was changed last year, resulting in higher numbers.
“It doesn’t seem that coherent with the economic activity that is happening now,” said Abhimanyu Sofat, a co-founder of Advisesure, an investment advisory firm.
Mr Sofat said that there were “worrying” signs in India’s services sector and exports, while recent corporate earnings had not been as positive as expected.
“I think that these numbers will be taken with a pinch of salt. I would not assume that the current numbers are something to be happy about.”
Analysts at Capital Economics wrote in a research note that the “strong GDP data alongside upwards revisions to earlier quarters’ growth rates is more likely to deepen doubts about the quality of the official data than improve sentiment towards India’s economy”.
By comparison, China’s economy slowed to 6.8 per cent in the October to December quarter compared to the same period a year earlier. Spending in rural areas, for example, has been curbed by weak monsoon rains over the past couple of years because low rainfall hurts crop production.
India’s exports have also been performing poorly because of economic weakness in its key markets, including other parts of Asia and Europe, while the sharp depreciation of the Chinese yuan makes China more competitive as a source market for products for foreign countries.
But there are also positive indicators for India’s economy, including lower inflation levels, which have eased amid a fall in commodity prices.
India’s central statistics office last month revised its economic growth estimate for the past financial year to the end of March 2015 down to 7.2 per cent from 7.3 per cent.
The consensus is that India needs to achieve economic growth levels of 8 per cent or higher to create jobs and support its population of more than 1.2 billion.
Mr Sofat said that India needed to take action on reforms to improve the environment for investment. The latest GDP figures were released after the markets closed. Ahead of the data release, the benchmark Bombay Stock Exchange Sensex closed down 1.34 per cent at 24,287.42.
Anand James, the co-head of the technical research desk at Geojit BNP Paribas Financial Services, said that stocks moved lower as “investors chose to book profits” ahead of the data.
The Indian rupee weakened by 0.4 per cent on Monday to about 67.90 against the US dollar.
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