Sunday, July 1, 2007

Rise In Economic Growth rate- Positive Sign???

The Indian economy has grown by a whopping 9.4 % in 2006-07, overcoming the government-forecast rate of 9.2 %, this was 9 % last year. The gain has been led by a boom in services, like outsourcing, which was neither dampened too much by a series of interest rate hikes in the fourth quarter to reduce a high rate of inflation, nor by the rise of the rupee to a 9-year high. GDP, measured in absolute terms, was measured at Rs 28, 48,157 crore in 2006-07. There was a noticeable jump in the per capita income of the average Indian to Rs 22,483 in 2006-07 as compared to the previous fiscal’s Rs 20,734. While that was at the individual level, at the country level, India’s net national income rose from 9.1 % in the previous fiscal to the 2006-07 high of 9.9 %.

However, this is still behind China, which registered a 10.7 % rise. The last time Indian economy grew anywhere near that rate was in 1988-89, when it achieved a 10.5 % growth rate.

While agriculture grew marginally to 2.7 % from the previously achieved 6 %, construction on showing a similar, downward, bent of mind fell from 14.2 % in the previous fiscal to 10.7 %. The manufacturing sector showed a growth of 12.3 % in 2006-07 versus 9.1 % in the previous year. However, this great show was put in shade by the hotels, trade, transport and communication sectors, which grew at rates of 13 % from the previous 10.4 %. Mining and quarrying was another slow-growth arena as it achieved a 5.1 % growth this fiscal, but this was still better than the 3.6 % in the earlier fiscal. Crucial areas that grew at an average rate were electricity, gas and water supply. They improved from the previous fiscal’s 5.3 % to 7.4 % growth. There was a marginal slowdown, in the services sector involving real estate, insurance, financing, and business growth to 10.6 % from the previous 10.9 %. However, expectations from this arena were for much greater growth.

As far as the current fiscal (2007-08) is concerned, while the Reserve Bank of India is saying a 8.5 % growth is achievable, the finance minister P. Chidambaram is on record saying that 9 % is gettable. At the international level, various agencies like the Global Development Bank, are prophesying a much smaller growth rate of between 7.5 % but less than 8 %.

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