India’s fastest growth in over two years shows the economy is recovering, Finance Minister Arun Jaitley said yesterday, adding the robust expansion would help the government meet its ambitious fiscal deficit target.
India’s economy grew by a forecast-beating 5.7% in the first financial quarter, its best pace since early 2012, according to official data on Friday, as the election win of the Bharatiya Janata Party in May spurred business confidence.
The right-wing government’s moves to accelerate bureaucratic decision-making and make it easier to do business are already paying dividends, Jaitley said.
“With the long-term impact of all these new initiatives setting in, I’m sure the impact in coming (financial) quarters will be much larger,” Jaitley told reporters in New Delhi.
India’s economy posted two years of sub-five per cent growth, staggering under high interest rates to curb stubborn inflation, a weaker global economic backdrop and a fall in foreign investment as corruption scandals embroiled the previous Congress government.
The performance marked India’s longest slowdown in a quarter-century.
But Jaitley forecast growth this financial year to March 2015 would pick up to 5.7%-5.9%, despite weak annual monsoon rains that are vital to the farm sector, after the economy grew by 4.7% last year.
Some economists say six-percent-plus growth may be achievable this year in light of the quarterly figures after earlier forecasting around five-to-5.5% expansion.
Economists say India needs at least eight to nine% growth to create jobs for its ballooning youth population.
Jaitley also said he was far more confident of reaching a fiscal deficit target for this financial year of 4.1% of gross domestic product from 4.5% the previous year.
The deficit target inherited from the Congress government had been called a poison chalice by some economists with weak tax revenues and high government subsidy spending make the goal tough to achieve.
But stronger growth makes it easier for the government to realise its promise of slimming the budget deficit - the gap between spending and revenues - to a seven-year low.
“With the first-quarter (growth) results, it (the deficit goal) is something that’s certainly achievable,” Jaitley said.
Jaitley said that the economy is expected to grow much faster in the coming quarters than the growth of 5.7% in gross domestic product (GDP) achieved during the first quarter of the current fiscal.
“Growth rate of 5.7% in first quarter is encouraging. The recent GDP figures show that the economy is on a recovery path. We expect the economy to grow much faster in the coming quarters,” Jaitley said here on the occasion of the new government completing 100 days in office.
The Indian economy expanded by 5.7% during the first quarter of the current financial year to log the highest growth yet in nine quarters or over two years.
GDP which is the aggregate market value of all the goods and services produced in the country, had expanded by just 4.6% in the previous quarter, that is January-March, and by 4.7% in the like quarter of last fiscal.
The 5.7% growth in April-June quarter is also the highest since the 6% increase logged during October-December quarter of 2011-12, as per data compiled by the Central Statistics Office (CSO).
On foreign investment climate, Jaitley said there has been a sea change in investor sentiment as they have shown interest in investment opportunities in India.
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