India's economic growth likely accelerated last quarter as the return of the cash that had been sucked out of Asia's third-largest economy reinvigorated demand.
Gross domestic product likely expanded 6.6% from a year earlier in the three months ended June 30, according to the median estimate from a poll of 14 economists by The Wall Street Journal. That compares with a 6.1% expansion in the previous quarter, which was the slowest growth in two years. The data is due Thursday.
A result in line with expectations would mean India will have ceded its title as world's fastest growing large economy to China for the second straight quarter. China's economy expanded 6.9% in the last two quarters.
New Delhi's move last November to withdraw 86% of the currency in circulation to dredge up cash stashed illegally hurt demand early this year. The central bank has been printing new bills to return the amount of cash in the economy to normal levels.
A 27% rise in government spending helped power growth during the quarter, particularly in the public administration and defense sectors.
However growth likely slowed in June because of confusion over new tax rates and procedures under the Goods and Services Tax regime rolled out from July 1.
"Some short term pain is inevitable, but in the medium term we will see gains," said Ms. Sahay of Standard Chartered Bank.
Still, economists don't expect India's economic growth to take off any time soon as banks and companies, struggling with a bad loan burden left over from better times, just don't want to make big bets.
"Until there is major traction in investment, there may not be a strong recovery," said Sujan Hajra, chief economist at Anand Rathi Securities.
-- Write to Anant Vijay Kala at Anant.Kala@wsj.com
(END) Dow Jones Newswires
August 29, 2017 03:54 ET (07:54 GMT)