The Indian economy did better in 2006-07 than previously estimated, the government announced on Thursday, encouraging finance minister P.Chidambaramto say the country’s economy would grow “close to 9%” in 2007-08, despite slowing in the manufacturing sector and “global uncertainties” triggered by the crisis in the US housing credit market.
Riding on a high investment rate of close to 36%, the economy grew by 9.6% in 2006-07, the highest in 18 years and even faster than the government’s own revised estimate of 9.4% in May.
The Growth Story (Graphic)
At current prices, the gross domestic product (GDP) in 2006-07 was Rs37.9 trillion, rising 15.7% over Rs32.7 trillion in 2005-06, figures released by the Central Statistical Organisation (CSO) said. Per capita income increased by 14% to Rs29,642 in terms of current prices.
CSO also revised upwards the 2005-06 growth figure from 9% to 9.4%. Last fiscal’s growth rate is the highest India has seen since 1989, when GDP grew by 10.5%.
Chief statistician of India Pronab Sen said “the major difference has happened in the case of agriculture, mainly because the states sent in their final estimates very late.” This is also true in the case of 2005-06, he added.
Lack of skilled workers has resulted in a wage boom in high-tech sectors, which along with increased investment, has triggered a spurt in consumption in sectors such as communications, financial, real estate and hospitality, he said.
The numbers, Chidambaram said, were no “surprise because they’re based on a rise in both domestic saving and capital formation.” Gross capital formation touched 35.9% of GDP last fiscal, while gross domestic savings contributed 34.8%, both competing with East Asian rates of 40%.
Although the Prime Minister’s Economic Advisory Council has predicted 8.9% growth for 2007-08, the central bank retained its 8.5% forecast on Tuesday, even while holding its interest rates at current levels.
(Sanjiv Shankaran contributed to this story.)