India’s economic growth rebounded in the three months ending in September, ending the five-quarter drop as businesses started to overcome the early dilemmas after the introduction of a national sales tax in July.
Prime Minister Narendra Modi has faced disapproval since the launch of the goods and services tax (GST) and the data released Thursday shows the growth. The tax intended to transform India’s twenty-nine states into a single customs union, yet it reached millions of small businesses with complicated rules and technical problems.
“Upbeat corporate earnings results have been reflected in the manufacturing sector,” said Tushar Arora, senior economist.
In the September quarter, the manufacturing sector increased 7 percent compared to 1.2 percent in the previous quarter, according to the data released by the Ministry of Statistics. Economists believe that the economy has progressed through the disruptions it faced after a shock ban on high-value banknotes in November 2016.
The data showed that gross domestic product rose 6.3 percent in July-September, the highest it has seen in three quarters compared to 7.5 percent in the previous year. Economic growth increased from 5.7 percent in April-June, but trailed China’s 6.8 percent and Philippines’ 6.9 percent.
During July-September, auto sales, manufacturing, construction, electricity generation showed growth more rapidly than the previous quarter. Annual growth in consumer spending that influences more than half of the economy, decelerated to 1.5 percent in the quarter from 6.7 percent in the previous quarter.
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Government spending slowed, showing an increase of 1.3 percent year-on-year compared to nearly a 17.2 percent year-on-year growth during the June quarter.
An investor research firm recently upgraded India’s sovereign credit rating for the first time in almost fifteen years, stating that the continued progress on economic and institutional reforms could boost the growth potential. The firm anticipates that the economy will grow 6.7 percent in the fiscal year ending March 31, and 7.5 percent the following year.