Aided by a sharp rise in manufacturing, the Indian economy grew 7.5 per cent in the March quarter, putting it ahead of China as the world’s fastest-growing large economy.

China had recorded 7 per cent economic growth in the January-March period.

For the full year 2014-15, India grew 7.3 per cent, higher than the 6.9 per cent recorded in 2013-14, using the new series. This is the country’s fastest annual growth since 2011.

However, this overall GDP growth of 7.3 per cent was a notch lower than the 7.4 per cent estimate put out by the Central Statistics Office (CSO) in February, official data released on Friday showed.

The CSO has also now lowered the third quarter (October-December 2014) GDP growth to 6.6 per cent, from 7.5 per cent estimated earlier.

Manufacturing drive Pushed by a sharp spike in ‘gross value-added’, manufacturing growth came in at 7.1 per cent, much higher than the previous year’s 5.3 per cent.

Finance Secretary Rajiv Mehrishi said the growth in manufacturing would mean “that we are also creating jobs in our growth path”.

Clearly, the adoption of the new GDP series (with base year of 2011-12) combined with the new concept of capturing ‘value added’ has had a positive effect on the overall output performance.

However, the picture on the ground is less than encouraging, said economists. They pointed to tepid growth in the Index of Industrial Production (IIP)

They said the latest GDP print may not influence RBI Governor Raghuram Rajan’s monetary policy on June 2, given that the RBI has never based its decisions solely on GDP performance.

The central bank will continue to be largely guided by inflation, liquidity and credit offtake considerations and is widely expected to go in for at least a 25 basis point rate cut given the good macroeconomic fundamentals, they said.

Finance Minister Arun Jaitley told reporters that the performance of manufacturing and services was encouraging. The latest numbers reflect the Indian economy’s potential to realise its strength and move into a higher growth trajectory, he said.

Jaitley also highlighted that weak agricultural performance was holding back the economy and that this reinforced the need for further investments into irrigation.

“If you look at it more broadly, the two sectors that are within the control of the government which are manufacturing and services – they have done well,” said Arvind Subramanian, Chief Economic Advisor to the Finance Ministry. “Whereas those two sectors which are somewhat outside the control — agriculture because of the monsoon, and exports, which are closely related to foreign demand, have not done as well. So, had those two been a little more cooperative, the numbers would have been even better.”

Finance Secretary Mehrishi expressed confidence that agricultural growth in the current fiscal will be better than the 0.2 per cent in 2014-15.

Subramanian said the monsoon is yet to begin, but going by the most recent report, it could be close to normal.

Industry view Anis Chakravarty, Senior Director, Deloitte in India, said manufacturing has looked up as a result of lower input costs and a fall in global commodity prices.

Chandrajit Banerjee, Director General, Confederation of Indian Industry (CII), said “the figures reconfirm CII’s assessment that the economy is showing signs of recovery which could gather pace in the next fiscal”.

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