In line with industry and market expectations, the Indian economy grew by an impressive 8.8 per cent during the first quarter this fiscal, powered by a robust growth in manufacturing coupled with a turnaround in agriculture and allied activities.
With the size of the economy pegged at Rs.17.12 lakh crore in the April-June quarter of 2010-11, the strong GDP (gross domestic product) performance marked the fastest pace of growth in nearly three years, way above the 6 per cent expansion achieved in the like quarter of 2009-10 and the 8.6 per cent growth posted during the January-March quarter of the same fiscal. In fact, the first quarter growth rate is the highest since the last quarter of 2006-07 when the economy expanded by about 9.5 per cent.
According to the official data release here on Tuesday, the manufacturing sector in particular, which was severely hit by the slowdown in the wake of the global financial crisis, posted a healthy growth of 12.4 per cent in the April-June quarter of 2010-11 as compared to 3.8 per cent in the same period last fiscal.
Alongside, agriculture and allied activities also expanded by 2.8 per cent during the quarter from 1.9 per cent in April-June 2009. Although as yet nowhere near the 4 per cent growth estimated for the farm sector this fiscal, it marks a turnaround and is poised to improve further following adequate monsoon rainfall which is expected to yield a good kharif harvest.
The fact that the GDP figures are in keeping with expectations despite the partial exit of stimulus prompted Finance Minister Pranab Mukherjee and India Inc. to exude confidence that the economy is back on the high growth. Stating that the economy would grow by 8.5-8.75 per cent at the least during the current fiscal, Mr. Mukherjee said: “The numbers are quite encouraging ... more encouraging point is 12.4 per cent growth which has been registered in the manufacturing sector. I think the highest growth rate in the last 11 quarters... I do hope it will be possible to maintain this level of growth.”
Echoing similar views, Federation of Indian Chambers of Commerce and Industry President Rajan Bharti Mittal said: “Given this trend in GDP growth, we expect to close the year with an overall performance of close to 9 per cent”. A slightly circumspect Assocham President Swati Piramal pegged the current fiscal's growth rate at 8.6-8.8 per cent.
Amplifying on the concern, Planning Commission Deputy Chairman Montek Singh Ahluwalia explained that although the manufacturing sector growth rate was likely to be lower during the rest of the fiscal year owing to base effect, the farm sector would post good growth and help in registering an overall GDP expansion of over 8.8 per cent.
Despite the expectation of better farm sector performance, a slowdown in government and household expenditure is likely to have an adverse effect on the economy.