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Indian economic growth hits highest rate in nearly two years

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Moody's cuts India's 2018 growth forecast to 7.3% from 7.5

Interim Finance Minister Piyush Goyal has said that, GDP growth has been increasing continuously every quarter with growth of 7.7 percent in the fourth quarter of 2017-18.

Growth for the 2017-2018 financial year as a whole came in at 6.7%, according to provisional figures. India's GDP grew at the fastest pace in seven quarters at 7.7 per cent in January-March.

Rapid growth in agriculture (4.5 per cent), manufacturing (9.1 per cent) and construction sectors (11.5 per cent) contributed to the overall growth of the GDP, the statement added. The strong growth was largely a combination of three factors - a pickup in manufacturing, construction and agriculture.

However on yearly basis, the Indian economy grew at a four-year low of 6.7 per cent in 2017-18, down from 7.1 per cent in the previous fiscal. Capacity utilisation remains at 75 per cent, an indication that investment activity has picked up but not across sectors. "The ability of public sector banks to support lending growth, the risk of monetary tightening and trade wars, and impact of higher crude oil prices on purchasing power of consumers and corporate earnings have emerged as risks", said Aditi Nayar, principal economist at ICRA.

The quarterly gross value added stood at 7.6 percent for the January-March 2018 period. "The banking sector remains in a fragile state, and such problems have the potential to derail the ongoing growth recovery".

Experts believe that GDP growth in 2018-19 could get a boost from prospects of good monsoon which will further boost the agriculutural produce and farm output.

The per capita income at current prices during 2017-18 is estimated to have attained a level of Rs 1,12,835 as compared to the estimates for the year 2016-17 of Rs 1,03,870 showing a rise of 8.6 percent. "On balance, GDP and GVA growth are expected to improve to 7.1% and 7.0%, respectively, in FY2019, from 6.7% and 6.5%, respectively, in FY2018".

As per the report, India's current account deficit will increase. The ongoing financial market turbulence in emerging market countries poses risks of a broader negative spill over effect on growth for a range of countries beyond Argentina and Turkey, while there is a risk that high oil prices will weigh on purchasing power and present an upside risk to inflation. Higher oil prices have already pressured the rupee, near a record low last week and Asia's worst performer.

Sampath Reddy, CIO, Bajaj Allianz Life said GDP growth Q4 FY18 came in above expectations at 7.7%, on the back of gross fixed capital formation (or investments).

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