At 8.9%, the economy is on a roll

New Delhi, Sept 29 | Updated: Sep 30 2006, 06:20am hrs
The Indian economy is booming. The countrys GDP grew a robust 8.9% in the first quarter of this fiscal, the highest in comparable quarters since 1999-2000. Inflation dipped for three consecutive weeks to 4.56% for the week ended September 16.

The GDP spurt was on the back of a very strong 11.3% growth in manufacturing. Services continued to do well with a 10.6% growth in output, against 9.8% a year ago.

But agriculture stayed sluggish with 3.4% growth, the same rate at which it grew in the corresponding period last year. The GDP growth reported in the corresponding period last fiscal was 8.5%.

Commenting on the high GDP growth in Q1, finance minister P Chidambaram said, Since 2004-05, GDP has grown at 7% plus every quarter except Q2 of 2004-05. In the last five quarters, growth has moved up a notch.

With sound economic policies and fiscal prudence, the GDP growth could be maintained at 8% or above every quarter, he said, adding pushing financial sector reforms was vital for sustaining the momentum. The finance minister said maintaining GDP growth at current level was contingent on adequate credit flow to productive sectors at reasonable rates.

Bank credit has grown 31% so far this fiscal, prompting the RBI to hike the benchmark rate three times.

FMSPEAK

With sound economic policies and fiscal prudence, the GDP growth could be maintained at 8% or above every quarter
Growth in bank credit should moderate, but it is important to ensure adequate and reasonably priced credit to productive sectors
Inflation is moderating, although wheat and pulse prices continue to exert some pressure on consumer price index

According to official data released on Friday, within services, trade, hotels, transport and communications sectors showed the highest growth of 13.2%, compared with 11.7% in the year-ago period.

Construction growth, however, slowed to 9.5% from 12.5% a year ago. Growth in electricity, gas and water supply slipped to 5.4% from 7.4% in April-June 2005-06.

Mining registered a growth of 3.4% compared with 3.1%. Financing, insurance, real estate and business services grew marginally faster at 8.9% against 8.8% . Community, social and personal services rose by 7.4% from 7.3% in the corresponding period of last year.

In rupee terms, GDP at factor cost stood at Rs 6,56,064 crore in the first quarter this fiscal, against Rs 6,02,476 crore in April-June 05-06.