The figure was for year-on-year for the third quarter (October-December) of India's fiscal 2016.
While there are market doubts about the accuracy of government GDP figures for both countries, India now appears to be the world’s fastest growing major economy, particularly in view of China's sustained economic slowdown.
Some asset allocators have suggested it might be time to put China allocations on hold and opt for India instead.
China’s “imitation of capitalism”, is one of the major reasons for China's current economic challenges, according to Jason Hollands from Tilney Best Invest. It has propped up inefficient businesses and avoided the healthy cycle of defaults that would occur in a true market economy, allowing overcapacity to build up, creating a potential deflationary powder keg, according to Hollands.
"Official policy recognises the need to rebalance the economy away from internal investment and exports, and to develop the Chinese consumer and service sectors instead. But this is a transition which is not a quick fix and will take many, many years," said Hollands.
Hollands notes that some of the best Asian and emerging market managers are also very wary of China, including Angus Tulloch, whose Stewart Investors Asia Pacific Leaders fund currently has only 1.3% invested in mainland China, compared to an index weighting of 23.5%. "Instead, the Stewart Investors team are putting their chips on the India table, with 23.1% exposure, versus a 7.6% index weighting," said Hollands.
India is indeed on a roll, as the recent GDP figures would suggest. “Despite the recent volatility in the emerging markets, India remains a bright spot," said Ajay Marwaha, director of investments at Sun Global Investments.
"Helped by low oil prices, the Indian government has made significant reforms to bring down the deficit and manage inflation. This, combined with the government’s ambition to make India the world’s preferred destination for investment through the opening up of the bond market, has created optimism around India’s growth trajectory," he added.
There are several reasons for choosing India, according to Georgina Hellyer, global emerging markets portfolio manager at Columbia Threadneedle. First, as a commodity importer and net importer of oil, the country has received a massive boost to its terms of trade lately. Second, it is a great example of a structural growth story. And, as often mentioned, it has a rapidly growing working population. "Historically, it hasn't reached its potential," said Hellyer. But its investor-friendly government with a mandate for reform should lead to a "steep change in the growth rate of the Indian economy," according to Hellyer.
Marwaha remains optimistic. “Higher disposable incomes, increased government consumption and a marginal pickup in investments via capital expenditure give us reason enough to believe that a gradual growth recovery is underway and we expect India’s growth rate to straddle 8% in 2016.”
Damian Testi, stockbroker at Walker Cripps Stockbrokers, however is not sure he would choose India over China despite the current situation. “China has put so many steps in place for the future -particularly in areas such as shipping- that long term the country is poised to maintain a much better place than India in terms of growth,” he said.