MUMBAI, India – India’s economic growth rose to a higher-than-expected 4.8 per cent in the quarter that ended in September, the government said Friday, a boost to those hoping that Asia’s third-largest economy has turned a corner after recently clocking its slowest expansion in 10 years.
Still, the expansion during the quarter was far below the average 8 per cent that India held for a decade and is short of what the government says it needs to create jobs and pull millions out of poverty.
The growth beat forecasts by many analysts, including Mumbai-based Kotak Economic Research, but only by a fraction of a per cent.
“It’s slightly higher from what we expected — but it’s still below 5 per cent,” Kotak economist Madhavi Arora said, adding that while it is an improvement on the 4.4 per cent of the previous quarter — the slowest growth in a decade — the new number is “still not exactly good.”
India’s government estimates it needs 8 per cent growth to provide jobs for the 13 million people entering the workforce each year out of a population of 1.2 billion.
Just a few years ago, India was touted as a rising economic power to rival China. But poor infrastructure, tangled bureaucracy and delays in economic reforms have dampened investment, while high inflation and weak consumer spending have also hurt the economy.
Still, after a steep currency fall in August that saw the Indian rupee hit an all-time low, India’s outlook is looking somewhat better. The rupee has mostly stabilized — although at around 62 rupees to the dollar it is more than 10 per cent lower than it started the year — and India’s exports, which had been weak, grew by double digits last quarter.
All this fuels speculation that India’s economy may have bottomed out last quarter and is on the way back up. But Samiran Chakraborty, head of research for Standard Chartered Bank in India, cautioned against over enthusiasm.
“We should have perspective. It came down from 9 per cent to this number in just two years,” he said. “The economy may have stabilized but we don’t see any kind of substantial recovery in the next few quarters.
“The kind of growth that India will require to serve the aspirations of the burgeoning youth population — we are still off from that kind of growth rate,” Chakraborty said.
Friday’s growth figures for the July-September quarter were dragged down by a weak manufacturing expansion of just 1 per cent, though that represented an improvement over the previous quarter, which saw a manufacturing contraction.
The services sector grew 10 per cent. Agriculture grew by 4.6 per cent, buoyed by a beneficial monsoon rain season that yielded good harvests.