Public spending major driver of robust GDP growth: HSBC

The GDP print reinforces our view that much of the current uptick in growth is led by the government's push to construction and consumption, the HSBC report said


New Delhi: India retained the tag of the fastest growing major economy with a growth of 7.7% in the March quarter on robust performance by manufacturing and service sectors as well as good farm output.

The global financial services major HSBC has cited four key drivers for the rise in growth print core GVA, the public spending component of GVA, construction, and rise in central and state government fiscal deficits.

The “hand of government” was the main driver behind the rise in January-March GDP growth to 7.7% the fastest pace in seven quarters as exports and private consumption disappointed, says an HSBC report.

As per the report, core GVA, which is a rough proxy for private sector growth, moderated slightly in the March quarter to 7.2% versus 7.4% last quarter and 4.1% in the same quarter last year.

On one hand, while manufacturing and agriculture growth rose, exports and private consumption disappointed, it added.

According to HSBC, the public spending component of GVA and the government consumption component of GDP grew at a rapid pace, accounting for roughly one-fifth of overall growth.

Moreover, construction and capital formation grew at double digits and public roads contracts awarded quadrupled in the March quarter.

Besides, central government fiscal deficit for FY18 rose to 3.5%, versus a budget estimate of 3.3% and this has growth dividends., the report noted.