India once again becomes the fastest growing economy

India has once again captured the status of being the world’s fastest growing economy in the October-December quarter. India has outdone China for the first time in the year as there was a rise in the government spending, manufacturing, and services.

India is Asia’s third-largest economy, and it grew by 7.2 percent in December quarter which is the fastest of five quarters as per the Ministry of Statistics. This data beats China’s 6.8 percent and has a forecast 6.9 percent by analysts surveyed by Reuters.

There was an early interest rate hike on the agenda which made India raise its 2017/18 GDP forecast to 6.6 percent from 6.5 percent. Indian manufacturers and service industries are still in a process to overcome interruptions from the launch of national sales tax in July.

In the December quarter, annual growth in the manufacturing sector climbed to 8.1 percent from 6.9 percent in the previous sector while financial and other sectors climbed to  7.2 percent from the previous 5.6 percent.

The expert’s view is that settling down of Goods and Services Tax (GST) reforms will boost growth in the next fiscal year, and the Reserve Bank of India is trying to balance inflation and growth. RBI can also present a hike in the interest rates after the policy meeting on April 5.

We expect a rate hike from RBI, most likely at the August review,” said Abhishek Upadhyay, economist, ICICI Securities Prime Dealership, citing inflationary pressures.

The Reserve bank has not changed its key rate since a 25 basis points cut in August. The impact of Retail inflation eased marginally to 5.1 percent in January from a 17-month high of 5.2 percent in December.

Urjit Patel, RBI governor, this month said the economic recovery was at a nascent stage and called for a cautious approach.