NEW DELHI — India missed a chance to overtake China as the world’s fastest growing major economy as its expansion last year fell short of estimates.
Gross domestic product rose 7.3 percent in the 12 months ended March 31 from a year earlier, the Central Statistics Office said in a statement in New Delhi on Friday. That was slower than the 7.4 percent median estimate in a Bloomberg survey and compares with China’s 7.4 percent expansion in 2014. The International Monetary Fund predicts India will outpace China in the current fiscal year.
The weaker number is more in line with other indicators showing slowing output and sluggish corporate earnings. It may add pressure on central bank Governor Raghuram Rajan to lower interest rates for a third time this year when he reviews policy on June 2.
“The official GDP data are overstating the strength of the economy,” Shilan Shah, an economist at Capital Economics Ltd., wrote in a report, “and probably by a significant margin.”
Prime Minister Narendra Modi has sought to make it easier for businesses to operate during his first year in office, including through reduced red tape and allowing more foreign investment in some sectors. Other moves to make it easier to buy land and implement a national sales tax are stuck in parliament.
Indian growth was 7.5 percent in the January-March period, faster than a 7.3 percent expansion predicted in a Bloomberg survey. The rate for October-December was lowered to 6.6 percent on Friday from an originally reported 7.5 percent.
Gross Value Added, a component of GDP, rose 6.1 percent compared with a 7 percent survey estimate.
“The number is on the lower side essentially on extremely weak agricultural growth and low public administration that’s linked to government spending,” said Sonal Varma, a Mumbai- based economist at Nomura Holdings Inc., referring to GVA. Government spending will rebound and “the rest of the economy showed much better growth than in the past, which is encouraging,” she said.
The economy’s main growth drivers include the finance sector and real estate, followed by trade, hotels, transport and communication. The agricultural sector, which employs more than half of the population, has slowed in recent years.
Most analysts in a Bloomberg survey predict Rajan will cut the repurchase rate to 7.25 percent from 7.5 percent. Swaps indicate he’ll decrease it to 7 percent by the end of 2015.
Rajan, who said earlier this week that growth was “still slow in picking up,” is among economists who’ve raised questions about the government’s new GDP data series unveiled in January. The latest government data show factory output at a five-month low and exports dropping for a fifth straight month, while bad loans are estimated to rise to a 15-year high.
Former Prime Minister Manmohan Singh on Wednesday accused the government of fudging figures to hide a fragile recovery. In a speech to the National Students Union of India, he called on the administration to give correct information to citizens.
“Is growth picking up?” Pranjul Bhandari, a Mumbai-based economist at HSBC Holdings Plc wrote in a report on Thursday. “Depends on who you ask, what indicators you look at and, more recently, how much you buy into the new GDP series.”
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