New Delhi: India gathered momentum from January to March to extend its lead as the world's fastest growing large economy, helping Prime Minister Narendra Modi craft an impressive sales pitch for meetings with investors in the United States next week.
Having swept to power two years ago promising to revitalise Asia's third-largest economy, Modi has boosted spending on defence and infrastructure, while consumer demand has risen thanks to lower interest rates.
Those pro-growth policies helped gross domestic product grow a faster-than-expected 7.9 per cent year-on-year in the March quarter, faster than the December quarter's 7.2 per cent.
"Momentum is building up faster than anticipated and there is a demand pick-up on the horizon," said Shubhada Rao, chief economist at Yes Bank.
India's growth has overtaken that of fellow Asian giant China, which grew 6.7 per cent in the March quarter - the slowest in the world's second largest economy in seven years.
The figures from India's Statistics office also showed GDP grew 7.6 per cent in the 2015/16 fiscal year that ended in March, faster than a 7.2 per cent growth in the previous year.
The strong headline number in the quarter was mainly driven by strong consumer spending. An upturn in private capital investment, which has been dormant for the past four years, remained elusive.
Modi has tried to stimulate corporate capital spending through debt-fuelled higher public spending. Still, capital investment fell an annual 1.9 per cent compared with a 1.2 per cent growth in the December quarter.
Saddled with idle capacity and stretched balance sheets, companies are in no hurry to make new investments. Festering bad loans, which have made banks wary of fresh lending, have only worsened India's investment crisis.
