Stanchart revises FY16 GDP growth to 7.7% from 6.3%

The statistical boost to GDP is likely to continue in the next financial year as well, as the Indian economy is expected to clock 7.7 percent growth under the new series, higher than 6.3 percent projected under the older series, says a report by Standard Chartered.

According to the global financial services major, strong GDP prints in 2013-14 and 2014-15 are driven more by "statistical factors" after India released a new GDP series on January 30 rather than a pick-up on the ground. "We revise up our FY16 GDP growth forecast to 7.7 percent year-on-year under the new series from 6.3 percent under the old series, but expect policy makers to rely more on high-frequency data to assess the health of the economy in the near term," Standard Chartered Economist Anubhuti Sahay said in a research note.

The Central Statistics Office (CSO) estimates real GDP growth (with 2011-12 as the new base) at 7.4 percent in 2014-15 as against 6.9 percent in 2013-14. "However, we believe these strong results need to be interpreted with caution, as activity indicators and sentiment surveys underline significant slack in the economy," the report added.

The revised CPI inflation trajectory, otherhigh-frequency data and the upcoming budget are likely to steer monetary policy decisions in the immediate term, but we believe that high GDP growth rates will eventually reduce the need for rate cuts in the coming years.