New Delhi: India’s economic growth rate in 2005-06 has been revised upwards from 8.4% to 9%, the highest in 17 years, although this growth may have more to do with math than economic fundamentals. The Central Statistical Organisation (CSO), which calculates economic growth revised the final data for 2004-05 to show that the agriculture sector declined by 0.2%. A relatively better performance saw agriculture grow by an impressive 6% in 2005-06. The sector’s share in India’s economy, however, continues to decline, from around 22% in 2000-01 to 18% in 2005-06.
“The correct way of looking at agricultural growth will be to take the average of the past four years’ performance, which is only 2 %,” said Ashok Gulati, the director of the International Food Policy Research Institute. He added that this points to a crisis in the sector.
CSO had previously projected the growth rate for 2005-06 at 8.4%. In absolute terms India ‘s real gross domestic product (GDP), or the total value of its economic activities, aggregated Rs26,04,532 crore in 2005-06, compared to Rs23,89,660 crore in 2004-05.
Political and economic analysts welcomed the news, but cautioned that the government will have to take adequate measures to ensure that this trend is sustained.
Meanwhile, the Reserve Bank of India(RBI), in its quarterly review of credit policy, has, despite signalling a hike in interest rates, raised its forecasts for economic growth rate in the current year to 8.5-9% in 2006-07. In April it had projected 7.5-8% growth, which was revised in October to 8%.
“The best feature of this growth is the high rate of investment which clearly has been sustained and that augurs well for the future,” Planning Commission deputy chairman Montek Singh Ahluwaliasaid.
Economist Bibek Debroysaid that the growth would help the government meet its budgetary target for the fiscal deficit. This is usually represented as a ratio of GDP, and with that number soaring, the fiscal deficit is certain to look smaller.
Last fiscal’s high growth has come mainly from construction, which has risen the fastest at 14.2%, followed by transport and communication growing at 13.9%, and the financial sector at 10.9 %. The booming real estate market, the government’s emphasis on infrastructure, and a rapidly growing telecommunications industry have all helped. The manufacturing sector has done very well too, clocking a 9% growth for the first time in this decade.
CSO’s earlier estimate for agricultural growth in 2005-06 was 3.9% but that came before it decided to revise its numbers for 2004-05. Opposition parties are happy with the record growth, but Jagdish Shettigar, of the Bharatiya Janata Party’s economic cell, said, “The tougher test lies ahead. Sustaining it will decide if India manages to meet global expectations,” Shettigar said.
2005-06 is only the third year since independence when India has registered an economic growth of 9%. or higher The last time it happened was in 1988-89, with a 10.5 % growth, but it had more to do with statistics with the economy recovering from a bad drought the previous year.