India development update: financing double-digit growth
India's economy expanded at a faster pace even as several growth engines stalled: agriculture faced a second consecutive drought year, rural households were under stress, private investments flat-lined, and exports plummeted. Despite these drags, the working engines―demand from urban households and public investments―propelled the economy to a higher growth path. GDP growth accelerated to 7.6 percent y/y in FY16 from an average of 6.5 percent during FY13-FY15. Gross value-added (GVA) growth also accelerated, led by a pickup in industrial activities and a reliable contribution from services. To remain on this growth path and sustain the 7.6 percent growth rate into FY17, India will need to restart dormant growth drivers, while ensuring the working engines do not run out of fuel. The dissipation of the large boost from historically low oil prices in the past year will make this a challenging task, but prospects of a normal monsoon, which can reactivate agriculture and the rural economy, may help. A stabilization of global trade that lifts exports would provide further support.