Economy in India Grows Faster than That of China

The economic growth of India picked up during the quarter from July through September outpacing that of China on the improving demand domestically and activity in manufacturing, which could help persuade the central bank of the country to keep its interest rates the same at its meeting on Tuesday.

It is expected that the Reserve Bank of India will keep its interest rates the same after a 50 basis point drop that was sharper than had been expected at its most recent meeting, as it attempts to control the rises in prices ahead of a tighter inflation target for 2016.

The third largest Asian economy expanded over 7.4% based on an annual rate during the second quarter of its current fiscal year that will end March of 2016, in comparison to a 7% increase for April through June, said the country’s Statistics Ministry.

China has reported an annual growth rate of 6.9% for its three-month period ending September 30.

A survey by analysts had forecasted the GDP growth for India to be 7.3% for the quarter ending the end of September.

Stronger growth will help Narendra Modi the Prime Minister after defeats in state elections in Bihar the third most populous state in India.

Modi has been focusing on reforms to help accelerate the growth and is hoping to convince opponents to implement a national sales tax during 2016.

Analysts said that the goods and services tax, that seeks to unify the 29 states in India into on single market, could help increase the growth in the GDP to nearly 8% over the next fiscal year.

The economy has not fired on all its cylinders and for some analysts, growth was driven for the year more from consumption than by investments.

An increase of more than 23% in the income of close to 10 million employees in the government and pensioners starting in January could boost spending by consumers.

A drought that has taken part in parts of India for a second consecutive year hurt output by farms and rural wages, which hit demand for new farm machinery such as tractors.

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