Strong fourth quarter

June 01, 2010 11:27 pm | Updated 11:27 pm IST

The revised estimates of national income by the Central Statistical Organisation for 2009-10 present a generally positive picture of the economy. During the year, the economy grew by 7.4 per cent, marginally higher than the 7.2 per cent projected in February's advance estimates. A better-than-expected 8.6 per cent growth during the fourth quarter is the main reason. Industry has been a star performer. The strong performance of the crucial segments of industry has been substantially captured by the monthly index of industrial production. The index of manufacturing registered a growth rate of 10.9 per cent, while that of mining rose by 9.7 per cent. Significantly, these indices spurted during the second half of the year, suggesting that the momentum will carry into the new year. The other growth-driver, services, was constrained by the sharp fall in government expenditure during the latter part of 2009-10. The growth rate of the “community, social and personal services” sector declined to 5.6 per cent from the 8.2 per cent estimated in February. It is the better showing of this segment that buoyed the growth during the first half of 2009-10. The most heartening aspect is that growth was broad based: a number of segments were consistent performers with growth rates of 5 per cent and more. These included electricity, gas and water supply, trade, hotels, transport and communications and financing, insurance, real estate and business services.

The biggest surprise has been the performance of agriculture, which recorded a growth of 0.2 per cent as against the minus-0.2 per cent indicated in the advance estimates. The improved estimates of production of important crops by the Ministry of Agriculture have been the principal reason. In fact, according to all estimates, whether by the CSO or others, agricultural growth rate for 2009-10 was expected to be negative. The positive growth is commendable in the face of a poor south-west monsoon, floods and droughts in different parts of the country during 2009. Agriculture and allied sectors, far from being a drag, can in fact contribute significantly to pushing the economy to a higher growth trajectory. After recording an average growth of over 9 per cent for three years between 2005 and 2008, GDP slipped to 6.7 per cent in 2008-09 in the wake of the global recession. A growth rate of above 7 per cent last year reaffirms the economy's resilience. The near-term prospects depend much on the south-west monsoon. Inflation remains a threat and the Reserve Bank of India and the government will no doubt weigh the consequences of monetary action, such as a hike in the interest rates, on economic growth.

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