02/01/2008

News / Indian Economy to grow 9% on investment boom

NEW DELHI: Buoyed by revision in growth estimates for 2006-07, finance minister P Chidambaram on Thursday exuded confidence that the country would grow close to 9% this fiscal on the back of an investment boom.

The economy grew faster in 2006-07 than previously estimated and clocked 9.6%, highest in 18 years. Earlier estimates had pegged the growth rate in 2006-07 at 9.4%. Mr Chidambaram emphasised the government could make rapid policy adjustments to sustain the high growth in the wake of heightened global uncertainties.

“It is a matter of considerable satisfaction that despite turbulence and heightened global uncertainties, our economy grew 9.6% in 2006-07 and is estimated to grow close to 9% this year. It is difficult to say which side of 9% it would be. However, if it falls on the right side, I’ll be doubly happy,” he said. He added that economic think-tank NCAER had forecast a GDP growth rate of 9.1% for 2007-08.

The new revisions put the country’s average growth over the past three years at 8.8%. “This shows that since the United Progressive Alliance came to power, there has been an investment boom, people are investing and they have confidence in future,” Mr Chidambaram said.

According to the revised figures released by the Central Statistical Organisation (CSO) on Thursday, the country’s per capita income growth rate stood at 8.1% in the last fiscal. It also revised upwards economic growth rate in 2005-06 to 9.4% from the earlier 9.0%.

“My goal is to maintain the same level of growth but, at the same time, the government reserves the right to make rapid adjustments depending upon evolving global economic situation. Despite turbulence and heightened uncertainty, our economy is growing at 9.4% (2005-06), 9.6% (2006-07) and is estimated to grow at close to 9% (2007-08),” Mr Chidambaram said.

“We are not making policies and we are not taking administrative steps in a vacuum. We are doing so where there is heightened uncertainty and we are making rapid adjustments. We are confident that if we keep firm hands on the wheel, the Indian economy will sail through turbulent waters. We are maintaining a balance between growth and inflation,” he said, adding that inflation is still below 4% and growth is well above 8%.

In response to a question, Mr Chidambaram said that it is too early to draw any clear conclusion on the impact of the recent US federal reserve’s interest rate cut by 75 basis points. “Let us wait for a day or two,” he said.

The improved growth in the GDP during 2006-07 has been achieved due to all-round improvement in mining, manufacturing and services sectors, which helped to offset the slower growth in agriculture sector.

While agriculture sector grew by 3.8%, down from 6.1%, manufacturing sector recorded 12% growth, which is substantially higher than 9.0% growth recorded in the previous year. The economy expanded by 9.3% in the first quarter and 8.9% in the second quarter of this fiscal.

The rising interest rates have apparently taken a toll on industrial production which nose-dived to 5.3% in November 2007 against a whopping 15.8% a year ago. During the first eight months of this fiscal, the index of industrial production slid to 9.2% from 10.9% during the corresponding period a year ago.

Source: http://economictimes.indiatimes.com/Economy/Economy_to_grow_9_this_fiscal/articleshow/2747381.cms

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