Indian GDP Growth Hovers Around 9 Percent for Second Straight Quarter
Dec. 1 – New gross domestic product figures released by the Central Statistical Organization on Tuesday show that the Indian economy is continuing to expand at a blistering pace despite a slow global economy. At 8.9 percent for a second quarter in a row, the economy may well achieve IMF estimates of over 9.7 percent growth for the year.
“I always go by conservative estimates. According to IMF estimates the GDP growth would be more than 9 percent. The IMF may be correct this time. Normally, I don’t agree with the IMF. Perhaps this time, I may agree,” said India’s Finance Minister Pranab Mukherjee.
Most promising is news that the fastest growing sectors of the Indian economy are the transport and communication sector at 12.1 percent and the manufacturing sector at 9.8 percent; areas that have backward and forward linkages throughout the domestic economy and will help sustain economy-wide growth.
However, some fear that manufacturing growth may be slowing down as the sector’s growth was significantly slower than the 13 percent recorded for the previous quarter.
“Investment in manufacturing has been slowing down which is visible from the decline in the growth rate in the sector on a quarterly basis,” said Shanto Ghosh, and economist with Deloitte.
The figures also show that private sector demand continues to grow at a moderate pace – a welcome sign for businesses desiring to take advantage of India’s emerging middle class. Data on dispatches of cement bags, new telecom subscribers, car sales and airline bookings suggest that consumer spending will continue to be robust.
In the short run, inflation is running a little high, although interest rates remain only slightly above normal levels.
Some believe this quarter’s strong performance may prompt India’s central bank to introduce further monetary tightening steps to restrict inflation, which came in at 8.58 percent for October.
Interest rates have been raised six times since the start of the fiscal year, and the Reserve Bank of India has repeatedly said bringing down inflation remains a priority.
“The RBI will decide on monetary action depending on the behavior of inflation in December,” according to C. Rangarajan, chairman of the Economic Advisory Council to the Prime Minister.
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