India's growth staged a recovery in the September quarter as the economy emerged from the shadows of the impact of demonetisation and rollout issues linked to GST, prompting the government to say that it was poised for a durable recovery in the months ahead. Data released by the Central Statistics Office (CSO) on Thursday showed that the economy grew 6.3% in July-September, the second quarter of the current fiscal year — faster than the June quarter's 5.7% —the expansion led by robust manufacturing. Growth had slowed to a three-year low in Q1 as the impact of demonetisation and GST implementation issues hurt expansion. Since then, a raft of positive news has lifted sentiment. India improved its ranking significantly in the World Bank's Ease of Doing Business survey while global ratings agency Moody's Investor Services upgraded the country's sovereign rating. Another agency S&P kept the rating and the outlook unchanged but applauded the reform measures unleashed by the government which it said should help boost growth in the coming months. "The deceleration trend in the overall growth which was witnessed since the first quarter of last fiscal year has been now reversed; The acceleration in growth this quarter has been helped by a rapid growth in manufacturing which increased from 1.2% in the first quarter to 7% in the second quarter," finance minister Arun Jaitley said, exuding confidence that the momentum would be sustained. The upbeat GDP data comes in the midst of the Gujarat assembly poll campaigning where opposition parties have sought to use the slowdown narrative to attack the BJP. The rebound in growth is expected to act as a major boost for the BJP and help reassert prime minister Narendra Modi's reformist credentials. The 6.3% growth in the September quarter has helped break the cycle of 5 quarters of slowing growth. "It is quite a significant trend reversal," the country's chief statistician T C A Anant told reporters. "I would expect the overall dynamics to reassert itself and the growth path to return to more normal level and that is in some sense happening," he said. Economists pointed to several positive signals such as a good kharif crop, boost to manufacturing due to GST concessions. They expect growth to be closer to 7% for the full year. The sluggishness in the farm sector emerged as a concern. The farm sector grew 1.7% in the September quarter, slower than the previous quarter's 2.3% and below the 4.1% in the second quarter of 2016-17. "The clear conclusion that one can draw is that the value added originating from the rural sector has slowed more sharply than the urban sector for the first half. Overall the source of growth in the first half has been the urban areas. However certain important schemes such as the Bharatmala, low cost housing in rural areas are expected to mitigate the trend," said Soumya Kanti Ghosh, group chief economic adviser at State Bank of India. "Nevertheless the policy prescription for the next the coming budget should be that the rural focus of the previous two budgets must continue. There is also a need to prioritize certain rural schemes on an urgent basis. The doubling of farm income must receive the thrust," he said. The mining sector also displayed strong signs of a turnaround rising an annual 5.5% in the three months to September compared with a decline of 0.7% in the previous quarter and contraction of 1.3% in the second quarter of 2016-17. "While improving modestly, construction stood out as the slowest growing of the industrial sub-sectors in the second quarter of FY2018. Weak consumer sentiment, led by factors such as the demonetisation-led drag, the full implementation of the RERaD Act, from May 1, 2017, and the implementation of the GST from July 1, 2017, weighed upon the performance of the construction sector," said Aditi Nayar, principal economist at ratings agency ICRA. Madan Sabnavis, chief economist with Care ratings pointed to the sluggishness in investment where gross fixed capital formation has fallen from 27.1% to 26.4% which he said was reflective of the absence of private investment in abig way. "Quite clearly the government needs to fill the gap to keep the investment number ticking. The real estate/construction sector would also have to closely as watched as this segment has been affected by a combination of reforms including demonetization, RERA, GST which hopefully is temporary. A recovery in this segment will help substantially," he said. India Inc termed the growth rebound as a "great confidence booster." Some economists sounded caution. "Administrative issues related to tax refunds under GST and repeated changes being made to the structure/tax rates continue to lead to uncertainty for businesses and may weigh on growth in the road ahead, particularly for small scale units. That would have negative implications for employment," ratings agency Crisil said in note.