In its advance estimate of economic growth for the current year (2009-10), the Central Statistical Organisation has projected a rate of 7.2 per cent. Though lower than the 7.5 per cent forecast by the Reserve Bank of India recently and the 7.75 per cent by the mid-year economic survey, the CSO’s projection gives room for optimism. If it materialises, India might well be seen creeping back towards the high growth trajectory, from which it slipped in 2008-09. After recording an average growth of well above 9 per cent for three years between 2005 and 2008, the GDP rose by 6.7 per cent last year — a commendable performance, given the difficult situation caused by the global financial crisis and the ensuing recession. A rate of above 7 per cent will be further proof of the Indian economy’s resilience. Besides, the economy has, by and large, weathered the consequences of a poor south-west monsoon during 2009. The agricultural sector has been particularly hit by severe droughts and floods in several parts of the country. Under the circumstances, a projected growth rate of minus-0.2 per cent for agriculture, though below last year’s 1.6 per cent, is better than expected and is unlikely to drag down the overall growth substantially as feared earlier. The contraction is partly attributed to a sharp drop in the production of food grains and oil seeds. Inadequate supply of food articles is the principal factor behind the raging food inflation.
Economic growth during the first half of 2009-10 has averaged 7 per cent, thanks largely to an extraordinary 7.9 per cent growth in the second quarter. While the government expects agriculture to recover sharply during the fourth quarter on top of a bumper winter crop, it is clear that it is the stellar performance of industry that will lift the GDP growth rate above 7 per cent. Manufacturing is expected to grow at 8.9 per cent. The mining and quarrying sector and the electricity, gas and water supply segment are predicted to post a growth rate of well over 8 per cent. The growth momentum is broad-based, with most of the sub-segments in industry and services performing above their long-term trends. The services sector, which is the traditional growth driver, is forecast to grow at around 8.3 per cent, less than last year. Construction as well as the segment comprising trade, hotels, transport, and communications will grow faster than last year. However, community, social and personal services may not do so well. With the spectre of high inflation looming large, the relatively strong growth might well induce the authorities to opt for a calibrated withdrawal of the stimulus packages.