India’s #Economic #Growth seen picking up, #RBI may hold rates steady

India's #Economic #Growth seen picking up, #RBI may hold rates steadyNEW DELHI : #India’s #Economic #Growth likely picked up in the July-September quarter, outpacing China on improving domestic demand and manufacturing activity that could persuade the Reserve Bank of India to keep interest rates unchanged on Tuesday.

#Asia’s third-largest economy likely expanded 7.3 percent in the second quarter of the current financial year 2015/16 that ends in March, compared with 7 percent in April-June, according to analysts polled by Shining India & other agencies

Stronger growth would be a boost for Prime Minister Narendra #Modi after a defeat in state elections of India’s third-most populous state of Bihar. Modi is focussing on reforms to accelerate growth and hopes to convince his opponents to implement a much-delayed national sales tax in 2016.

Analysts say the goods and services tax – which seeks to unify India’s 29 states into a single market – could help raise #GDP growth to around 8 percent in the next fiscal year.

“Higher government capital spending, as well as efforts to facilitate clearances and simplify approvals have contributed to a pickup in investment activity,” said Aditi Nayar, an economist at #ICRA, the Indian arm of credit rating agency Moody’s.

But she said that the recovery has yet to widen beyond select sectors since cheaper imports and shrinking exports will act as a drag on corporate investment this year.

A drought in parts of the country for the second straight year has hurt farm output and rural wages – hitting demand for farm machinery like tractors as well as consumer goods.

Although India’s headline growth rates appear flattering, that is in part the result of change in statistical methods that seek to capture more evidence of economic activity. Other barometers such as bank credit growth, jobs and consumer demand paint a less healthy picture, analysts say.

Bureau Report

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