India's economy picked up in the second quarter, official data showed Thursday, rebounding from a sharp slump in the wake of government reforms that dragged growth to three-year lows. Figures from the Central Statistics Office showed Asia's third-largest economy accelerated after five quarters of slowing growth, as the impact of a sudden cash ban and launch of a nationwide tax receded.
GDP growth rose to 6.3 percent in the three months to September, slightly below analyst expectations but bucking a slowdown that had persisted since early 2016. "This marks the reversal of that trend," declared Finance Minister Arun Jaitley on Thursday.
India's chief statistician T.C.A. Anant described the bounce back as "encouraging" but acknowledged growth over the same period last year was 7.5 percent. The upturn will nonetheless come as a relief for Prime Minister Narendra Modi, who has been dogged by criticism over two major reforms blamed for stalling much-needed economic expansion.
In the last 12 months Modi's government withdrew most of India's high-value banknotes from circulation in a snap move known as "demonetisation" and rolled out a national goods and services tax. Both measures sent shockwaves through India's $2 trillion economy.
Economic growth plunged to 6.1 percent for the first quarter of the current financial year before bottoming out at 5.7 percent in June, with analysts blaming the controversial note ban and citing the transition to GST. The new tax aims to transform the nation of 1.25 billion people and its vast economy into a single market.
The slump cost India its title as the world's fastest-growing major economy. The central bank last month downgraded India's growth forecast, as the government sought to allay slowdown concerns. The International Monetary Fund in October also lowered its growth forecast to 6.7 percent from 7.2 percent predicted in July, pointing to the impact of demonetisation and the GST.
But the government defended the pain as necessary to boost tax revenues, crackdown on corruption and absorb tens of thousands of new jobseekers into the economy every month. Jaitley said India had turned a corner, and was optimistic growth would now continue accelerating.
"This additionally indicates that perhaps the impact of two very significant structural reforms, demonetisation and the GST, is now behind us," he said. The Federation of Indian Chambers of Commerce and Industry said "signs of recovery are in sight" and welcomed India's recent 100th ranking on the World Banks's ease of doing business index - an improvement of 30 places.
Ratings agency Moody's also this month upgraded India's credit rating for the first time in more than a decade, citing Modi's economic reforms. But others were more cautious. Former finance minister P. Chidambaram, a senior leader of the opposition Congress Party, said the result was "far below the promise of the Modi government and far below the potential of a well-managed Indian economy".
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