Indian April-June GDP grows 9.3 % yr/yr
Written by Reuters
| New Delhi, August 31: | Updated: Aug 31 2007, 16:41pm hrs
India's economy in the April-June quarter grew a faster-than-expected 9.3 per cent from a year earlier, led by robust manufacturing and services, but analysts said the pace could moderate in coming quarters.
The annual growth rate for India's fiscal first quarter published on Friday topped both a median forecast of 8.9 per cent in a poll and growth of 9.1 per cent the previous quarter.
The stock market extended its strong opening gains after the data. The rupee was little changed around 41.02 per dollar, and the benchmark 10-year bond edged up 1 basis point to 7.92 per cent.
Analysts said the strong growth did not mean the central bank was likely to resume raising interest rates, but said it showed the need for vigilance against a build-up of price pressures.
"This number is good, but does not suggest any need for monetary tightening and we expect the current stance to continue as inflation has come off substantially," said JP Morgan economist Rajeev Malik.
"We see moderation in growth in coming quarters."
Manufacturing grew an annual 11.9 per cent in the April-June quarter, lower than the 12.4 per cent in the previous three months.
Services grew at an annual pace of 10.6 per cent, while farming, which the government is trying to revive, expanded by 3.8 per cent, matching the previous quarter's growth rate.
Asia's third-largest economy grew 9.4 per cent in the fiscal year that ended March 2007, its fastest rate in 18 years, and the central bank expects expansion of 8.5 per cent this fiscal year.
The central bank raised interest rates five times between June 2006 and March this year and has also increased banks' reserve requirements, measures that have cooled the property market and calmed inflation and loan demand.
"Growth will be about 9 per cent in the coming quarters. There is no need to change the monetary stance, but there has to be a close monitoring," said Saumitra Chaudhuri, economic adviser at domestic ratings agency ICRA.
India is now a $1 trillion economy after a growth spurt in the past four years second only to China's hot pace of expansion among major economies. This has given it increasing muscle in world trade talks and seen it invited to meetings of the world's leading industrialised economies.
The central bank said on Thursday India was on the verge of a step-up in its growth trajectory but only if accompanied by vigilance on price and financial stability.
Some economists see the economy averaging 7-8 per cent for the next few years due to private sector expansion and rising demand from a growing middle class.
Analysts say this will buttress the domestic economy in the event of a slowdown in demand around the world due to problems in the U.S. home loan market.
The scorching pace has generated jobs but it has also put pressure on roads, ports and other infrastructure, and increased wage and price pressures.