India, fastest growing big economy with 7.1 pct GDP growth

Sept 01, 2016 (LBO) – India maintained its title as the world’s fastest growing big economy in the April to June quarter with gross domestic product growth of 7.1 percent, the latest data showed.

Although this was its slowest pace for two years, and a slowdown from the previous quarter growth of 7.9 percent, it outdid China’s 6.7 percent growth.

India’s 2.3 trillion dollar economy is, however, smaller than China’s 11.4 trillion dollar economy.

Analyst Abhishek Upadhyay of ICICI Securities said growth “continues to be driven by government spending while private spending remains muted”.

Growth was dragged down in the quarter by a contraction in mining and a sluggish agricultural sector, BBC reported.

The slowdown is a concern for Prime Minister Narendra Modi, who recently simplified the tax system, getting the Goods and Services Tax approved by legislators.

India still ranks 130th in a World Bank index measuring red tape for small businesses, showing only a marginal improvement since 2015.

The monsoon season should, however, provide some support to growth. Normal rainfall this summer after two seasons of drought could lift rural consumption by 80 billion dollars in the year to the end of March 2017, according to Citibank estimates.

A wage rise for nearly 10 million federal government employees and pensioners could also help fuel spending.