New Delhi: The economy is expected to grow 9.2% this fiscal year, the fastest pace in 18 years, as a surge in manufacturing and services overshadows agriculture’s sluggish performance.
While the growth is lower than China, which grew 10.7% in the year ended December, this will be the second year running that the economy has averaged 9% plus growth.
The government was quick to take credit for the surging growth rates, noting that in the three years it has been in power, manufacturing growth has achieved significant momentum, accelerating from 8.7% to 9.1% and now to 11.3%.
Services were the other bright area, growing at 13% while growth in construction slowed to 9.4% from 14.2%. Agriculture, on which some 65% of the country’s population is dependent, saw growth rates plunge to 2.7% from 6%.
“Agriculture is an unfinished agenda,” said Ashok Lahiri, the government’s chief economic advisor. “The government is very, very focused on the sector this year. We want it to do better,” he said.
Planning Commission deputy chairman Montek Singh Ahluwalia, while conceding agriculture was doing poorly, noted that the “the last three years’ average growth in the sector is around 2.9%, making the 10th Plan target of 4% growth in the sector achievable.”
Both Lahiri and Ahluwalia said the latest numbers, released by the Central Statistical Organization, could be sustained in the near future.
“There are many countries which have maintained high growth rate for decades,” said Lahiri. “We are in the midst of preparing the Economic Survey and are looking at the economy carefully. Since the 11th Plan is targeting a 9% growth, I think this is a good first step.”
Ahluwalia said that he hoped the performance would be replicated during the 11th Plan, which covers 2007-2012. “Two years of growth at 9% means an average growth rate of 7.3% during the 10th Plan,” he said. “We would like to see this trend repeated for the 11th Plan period too.”
The gross domestic product, or the value of all domestic activities calculated at 1999-2000 prices for the current year, is estimated at Rs28,44,022 crore, compared to Rs26,04,532 crore in 2005-06. The real per capita income for the year has grown 7.9% to Rs 22,379.
The performance exceeded consensus estimates. “We seem to have consolidated our growth very significantly, driven by very high investment levels,” said D.K. Joshi, principal economist at Crisil, the credit rating agency. “There are many triggers to this growth, which make it very sustainable. Private corporate sector investment is the fastest growing segment (and) despite peak capacity utilization, sustained high demand is ensuring continued expansion of capacity. ”
With manufacturing and services accounting for over 75% of the nation’s economy, economists said poor agricultural performance was more a concern for commodity prices and food supplies than a stumbling block for the economy.
Pragya Singh and Monica Gupta contributed to this story