Manufacturing and agriculture drive India on path to recovery
By Erika Kinetz |
June 1, 2010, Tuesday
|
Print Edition
Print Edition
A REBOUND in manufacturing and recovering farm output has driven India's quarterly economic growth to 8.6 percent.
It is the nation's best result in two years and signals a return to pre-crisis expansion levels.
Growth for the financial year ended March was 7.4 percent, beating a government forecast of 7.2 percent, officials said yesterday. The acceleration in the January-March quarter is likely to add to pressure on the central bank to raise interest rates to contain inflation.
India has rebounded from the global downturn faster than expected thanks to domestic consumption and investment, but two uncertainties loom: Rain and Europe.
As farmers wait for the monsoon, hoping last year's drought won't be repeated, the nation's business elite watches Europe - which accounts for a fifth of India's exports - hoping its sovereign debt crisis won't dampen the investment that's needed to drive growth.
Manufacturing surged 16.3 percent off a low base for the March quarter, up from 0.6 percent a year earlier and its strongest performance in at least two years.
Agriculture, which remains a key source of employment, limped along at 0.7 percent, up from the prior quarter's contraction of 1.8 percent, but worse than a year earlier, when it grew 3.3 percent.
"We remain vulnerable to the monsoons, as ever," said Sachchidanand Shukla, a senior economist at Enam Securities.
"This is an annual uncertainty that can shave off 60 to 70 basis points from growth. If the monsoon were to fail again, growth will definitely slip below 8 percent."
He said an unusually bountiful winter crop boosted growth after the worst rainfall since 1972 diminished summer yields.
Yesterday's figures showed investment is becoming a key driver of growth as private consumption falls as a share of overall economic activity.
Investment as a share of gross domestic product rose to 34.6 percent during the March quarter, government data showed. That's far higher than it was in the 1990s, when it hovered near 22 percent of GDP.
It is the nation's best result in two years and signals a return to pre-crisis expansion levels.
Growth for the financial year ended March was 7.4 percent, beating a government forecast of 7.2 percent, officials said yesterday. The acceleration in the January-March quarter is likely to add to pressure on the central bank to raise interest rates to contain inflation.
India has rebounded from the global downturn faster than expected thanks to domestic consumption and investment, but two uncertainties loom: Rain and Europe.
As farmers wait for the monsoon, hoping last year's drought won't be repeated, the nation's business elite watches Europe - which accounts for a fifth of India's exports - hoping its sovereign debt crisis won't dampen the investment that's needed to drive growth.
Manufacturing surged 16.3 percent off a low base for the March quarter, up from 0.6 percent a year earlier and its strongest performance in at least two years.
Agriculture, which remains a key source of employment, limped along at 0.7 percent, up from the prior quarter's contraction of 1.8 percent, but worse than a year earlier, when it grew 3.3 percent.
"We remain vulnerable to the monsoons, as ever," said Sachchidanand Shukla, a senior economist at Enam Securities.
"This is an annual uncertainty that can shave off 60 to 70 basis points from growth. If the monsoon were to fail again, growth will definitely slip below 8 percent."
He said an unusually bountiful winter crop boosted growth after the worst rainfall since 1972 diminished summer yields.
Yesterday's figures showed investment is becoming a key driver of growth as private consumption falls as a share of overall economic activity.
Investment as a share of gross domestic product rose to 34.6 percent during the March quarter, government data showed. That's far higher than it was in the 1990s, when it hovered near 22 percent of GDP.
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