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India pulls ahead as world’s fastest growing large economy

India has extended its lead as the world’s fastest growing large economy.

Interest rates at a five-year low and cooling inflation have pushed up consumer spending which helped the country’s gross domestic product expand by 7.9 percent between January and March from the same period last year.

That was faster than the previous quarter’s 7.2 percent.

It means India’s growth has overtaken that of fellow Asian giant China.

Chinese GDP was up by 6.7 percent in the same period.

The only negative notes from the statistics were weak private investment and shrinking exports. Moody’s Investors Service said a recovery in private investment would be needed if India’s upturn was going to last.

Having come to power two years ago promising to revitalize Asia’s third-largest economy, Prime Minister Narendra Modi has increased spending on defense and infrastructure including road construction, new power lines and upgrades to the rail network.

There are some storm clouds on the horizon however; festering bad loans have made banks wary of fresh lending, forcing cash-strapped firms to keep a lid on capital outlays and many factories are still running well below capacity.

External uncertainties are also on the rise. Chances of US interest rates going up, Britain voting to leave the European Union, and China’s economy worsening all pose risks for emerging markets like India.

It has benefited massively from cheap crude over the past two years as its oil import bill halved, inflation fell and public finances improved.But economists reckon increasing oil prices could retard the growth rate, while boosting the inflation rate.