India's economic growth accelerates to 7.4% in Sept quarter

India's annual economic growth accelerated to 7.4 per cent in the three months through September from 7.0 per cent in the previous quarter, government data showed on Monday.

Analysts polled by Reuters had forecast annual growth of 7.3 per cent in the quarter. 

Stronger growth would be a boost for Prime Minister Narendra Modi after a defeat in state elections of India's third-most populous state of Bihar.

Modi is focussing on reforms to accelerate growth and hopes to convince his opponents to implement a much-delayed national sales tax in 2016.

Analysts say the goods and services tax - which seeks to unify India's 29 states into a single market - could help raise GDP growth to around 8 percent in the next fiscal year.

"Higher government capital spending, as well as efforts to facilitate clearances and simplify approvals have contributed to a pickup in investment activity," said Aditi Nayar, an economist at ICRA, the Indian arm of credit rating agency Moody's.

But she said that the recovery has yet to widen beyond select sectors since cheaper imports and shrinking exports will act as a drag on corporate investment this year.

A drought in parts of the country for the second straight year has hurt farm output and rural wages - hitting demand for farm machinery like tractors as well as consumer goods.

Although India's headline growth rates appear flattering, that is in part the result of change in statistical methods that seek to capture more evidence of economic activity.

Other barometers such as bank credit growth, jobs and consumer demand paint a less healthy picture, analysts say.

Meanwhile, here what epxerts have to say:

A. Prasanna, economist, , ICICI Securities Primary Dealership, Mumbai

"The number is along expected lines. The economy has bottomed out, but the recovery continues to be quite protracted and patchy.

"We expect full year GVA (gross value added) growth at 7.3 per cent. We expect a gradual recovery in 2016/17 in the average of 7.5-8.0 per cent on the back of higher consumption growth.

"As far as monetary policy is concerned, we expect RBI to continue to remain accommodative, and a further rate cut will be dependant upon government's fiscal road map and evolution of inflation in months ahead."

Ashutosh Datar, Economist, IIFL, Institutional equities, Mumbai

"It's neither a positive surprise nor a negative surprise.

Growth is tracking as per RBI's trajectory of between 7 per cent to 7.5 per cent for the full year.

That's where the consensus number is. "In that sense it's neither an alarming signal nor a sign that we're growing faster than estimated, so there is need to be cautious on rate cuts. 

It doesn't change anything. No change expected tomorrow (from the RBI)."