The government on Monday tweaked up the economic growth rate for the current fiscal year, sending a mild note of cheer to an economy worried by prospects of a slowdown.
India's gross domestic product (GDP) would grow by 8.6% in 2010-11, marginally above its original 8.5% estimate, buoyed by a strong rebound in the farm sector, the government said. But rising prices and volatility in foreign institutional investment (FII) remain key worries.
India's economy had grown by 8.0 % in 2009-10. Overall, the data showed strong domestic demand driving growth in India, despite some industrial sluggishness, while developed economies are showing a bumpy recovery.Finance minister Pranab Mukherjee said the buoyancy in tax collections was reflected in the GDP growth, which has been aided by strong spending in the private sector.
While private consumption is estimated to grow at 8.2 % in 2010-11 over the previous year, the growth in investment is anticipated at close to 9 %, advanced estimates of national accounts showed. Growth in government spending is estimated to moderate significantly to 2.6 % in 2010-11.
India's GDP grew 8.9% during the first six months of this fiscal year, making it the second fastest growing economy in the world, next only to China's estimated 9 % growth in 2010.
Consumer durables sales have grown at robust pace mirroring higher purchases of goods such as televisions, refrigerators and cars and a growing consumer appetite.
"The strong revival in private spending and improvement in investment growth is a welcome sign," Mukherjee said. "However, we still have some distance to go before regaining the investment growth witnessed in the pre-crisis period," he said.
Prices, however, remain a worry.