India's economic growth picked up pace at start of 2016: Poll

BENGALURU: India's economic growth accelerated slightly at the start of 2016 on stronger demand, a Reuters poll found, although recent surveys of purchasing managers suggest it lost some momentum going into April.

The poll of 26 economists predicted gross domestic product expanded 7.5 percent January-March, faster than the previous quarter's 7.3 percent but still well short of the recent peak of 8.3 percent in mid-2014.

A modest recovery in the agricultural sector and a steady performance in the services sector are the main drivers, Rishi Shah, an economist at Deloitte said.

Only three respondents - DBS Bank, IHS Global Insight and ZyFin Research - said growth slowed in the Jan-March quarter. Forecasts in the poll ranged from 6.9 to 7.8 percent.

While the median is still higher than China's first quarter rate of 6.7 percent year-on-year, there are signs India's economy might also face a few wobbles ahead.

Exports declined for the 17th straight month in April on muted global demand. Business activity at manufacturing and services firms also slowed during the same month, again on dwindling domestic and foreign demand.

Reserve Bank of India Governor, Raghuram Rajan, has also warned of challenges ahead. On Thursday, he said a sharp slowdown in China has the potential to spill over into other countries, including India.

Still, Rajan might not be able to cut interest rates as much as he did last year to give the economy a boost, especially as food prices are expected to spike in the next three months and push inflation higher, and expectations for an increase in U.S. interest rates are hardening.