India’s economy expands most in a year, aided by consumption

India's economy expanded at the quickest pace in a year, fuelled by consumption, boosting the central bank's scope to focus on fighting inflation.

Gross domestic product rose 13.5 per cent in the April-June period from a year ago, data released by the Statistics Ministry on Wednesday (Aug 31) show. That compares with a 15.3 per cent median estimate in a Bloomberg survey and with the 4.09 per cent growth in the three months to March.

The GDP print is underpinned by a revival of domestic demand, particularly in the nation's vast services sector, as the government eased virus-related mobility restrictions. 

While India remains the world's fastest growing economy, the pace of growth is seen moderating going forward due to global recession fears and rising borrowing costs. The central bank has raised the benchmark policy rate by 140 basis points in three rates moves since May and has vowed to do more to bring inflation under its 6 per cent target ceiling.

"We are seeing signs of waning of the intensity of tailwind generated by economic reopening," said Kunal Kundu, an economist with Societe Generale GSC. "Add rising borrowing cost to benign domestic consumption prospects, and business investment could be potentially underwhelming."

Meanwhile, private investment during April-June increased 20.1 per cent from a year ago, data show. Government spending rose 1.3 per cent while private consumption was up 25.9 per cent. BLOOMBERG

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