Indian economy expected to grow 7.2 pc in 2009-10: govt
2010-02-08 [12:44:15 hrs] | | The Indian economy is expected to grow 7.2 percent in the current fiscal, higher than last year’s 6.5 percent growth, the government said on Monday, reinforcing the belief that Asia’s third largest economy is fast emerging out of recession.
According to the Central Statistical Organisation, the manufacturing sector, which is the driving force of the faster-than-expected recovery, will expand 8.9 percent in 2009-10.
The official growth forecast is in line with other estimates this month and comes amid speculations that the country’s central bank could raise interest rates even before its next policy review in April to arrest inflation.
The Reserve Bank of India (RBI) and key officials of Prime Minister Manmohan Singh’s government have revised their initial forecast for the fiscal upwards following a surprising growth rate of the second quarter. The economy expanded by 7.9 percent in the quarter, driven by a sudden uptake in industrial production.
India’s factory output reported the eleventh straight month of expansion in November at 11.7 percent. Consumer durables production shot up 37.3 percent in the month from a year earlier, while manufacturing output grew 12.7 percent.
The exports sector, worst hit by the global slowdown, is also on the path of recovery, as indicated by latest government data. In December, exports rose an annual 9.3 percent to USD 14.6 billion, the second consecutive rise after 13 straight months of decline.
Policy analysts say that although the economy is fast returning to high growth trajectory, inflation remains a major concern for the government. India’s headline inflation jumped to a one-year high of 7.31 percent in December, mainly driven by high food prices.
Food inflation is ruling above 17 percent, putting huge pressure on the government to take policy actions.
RBI last month revised its wholesale price index inflation forecast for the fiscal to 8.5 percent and raised cash reserve ratio- the portion of deposits banks are required to keep with the apex bank, by 75 basis points to 5.75 percent, indicating that it is taking a serious view of the inflation scenario.
According to analysts, the central bank may raise key interest rates well ahead of the next quarterly policy review, scheduled to take place in April, if the growth is on steady track and inflation keeps rising.
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