Indian economy offers hope as China struggles

Still, India's robust headline growth does not square with the not-so-rosy ground reality.

"Growth momentum has improved in the last two years," said Kaushik Das, an economist with Deutsche Bank. "But the pace of recovery has been frustratingly slow."

Monday's data is expected to fuel hopes in New Delhi of taking the baton of global growth as China's economic slowdown deepens.

New investment commitments

However, with an economy only one-fifth the size of China's, India is in no position to support the global economy as its northern neighbor has.

Blessed with a huge domestic market and a large cheap workforce, Asia's third-largest economy has an opportunity to get more investment.

Lured by its prospects, iPhone maker Foxconn this month announced a $5 billion investment in India.

The announcement came days after Sony shipped its first made-in-India television sets, and General Motors unveiled a plan to spend $1 billion to expand its main plant.

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"It is India's moment," Junior Finance Minister Jayant Sinha said.

But very few believe it can seize the moment without making land, labor, bank and tax reforms.

Modi swept to power in last year's general election on a promise of speedier growth creating millions of manufacturing jobs.

But just 15 months after that electoral triumph, disenchantment has set in. Businesses are getting restless with slow progress in removing the hurdles that have stymied growth.

Parliamentary paralysis

Political acrimony, meanwhile, has left parliament paralysed. The last session ended without passage of a single reform legislation.

Shilan Shah, India economist at Capital Economics, described the washout session as a "missed opportunity".

Yet India is on the mend. Robust growth in indirect tax receipts points to a nascent revival in manufacturing sector. Foreign direct investments are up 30 percent from a year earlier.

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However, the improvement in the economy is in large measure due to a crash in global commodity prices, which has cooled inflation and helped narrow the fiscal and current account deficits.

Sure, urban consumption demand is picking up, but rural consumers remain glum. With capacity utilisation rates showing no signs of improvement, firms are not in a hurry to invest in new plants and machinery.

Festering problem of bad loans, meanwhile, has impeded credit flow and delayed full transmission of interest rate cuts. The Reserve Bank of India has cut the policy repo rate by 75 basis points since January, but banks, in response, have lowered lending rates by just 30 basis points.

"Key structural reforms remain crucial for a sustained pickup in economic growth," analysts at Yes Bank said in a note.