India's economy grows 7.5 percent in March quarter

India's economy grew faster than China's in the quarter through March, data showed on Friday, but a sharp downward revision for the previous quarter has added to doubts about the accuracy of a new method used to measure economic activity.

Asia's third-largest economy grew 7.5 percent year-on-year in the last quarter, outstripping China's 7 percent growth in the same quarter and beating a Reuters poll of economists who forecast 7.3 percent growth.

Previously, India had celebrated that its growth was faster than its larger neighbour in the December quarter, but on Friday the Central Statistics Office sharply revised the number down to 6.6 percent from 7.5 percent, further distorting the picture.

"At face value, today's GDP figures for (January-March) suggest that India is the fastest-growing major economy in the world," said Shilan Shah, India Economist at Capital Economics.

"In reality though, the GDP data remain wildly inconsistent with numerous other indicators that point to continued slack in the economy."

Economists are already having a hard time reconciling the headline numbers with dismal corporate earnings, weak industrial activity and an elusive recovery in bank credit.

Full-year growth for the fiscal year ending in March came in at 7.3 percent, data on Friday showed, up from 6.9 percent in 2013/14 and a tad lower than an official estimate of 7.4 percent.

Back in December, the government, using the old methodology, estimated growth for the year would be 5.5 percent, which would have represented a modest improvement after two successive years of growth below 5 percent - the worst in a quarter century.

But the Central Statistics Office's reworking of the numbers has transformed India's official growth pace under Prime Minister Narendra Modi, who made economic reforms a priority during his first year in office.

The new method measures economic activity by market prices instead of factor costs, to take into account gross value addition in goods and services as well as indirect taxes.