GDP shoots up, but so could interest rates | business | Hindustan Times
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GDP shoots up, but so could interest rates

business Updated: Jun 01, 2010 01:17 IST
HT Correspondent

A sharp rebound in industry and services combined with a better-than-expected farm output helped the Indian economy grow by 7.4 per cent in 2009-10. The expected results: more jobs, more wealth.

But before you uncork the champagne, watch out for three uncertainties — monsoon that could get delayed, price rise that is showing no sign of abating and interest rates that are set to rise.

The country's gross domestic product (GDP) — the sum of all the income generated in the economy — grew by 8.6 per cent in the quarter that ended March 31, 2010 driven by a robust 16.3 per cent growth in the manufacturing sector as companies expanded capacities to meet rising demand, latest data released by the central statistical organisation (CSO) on Monday showed.

"I expect the current economic momentum to remain," Finance Minister Pranab Mukherjee told reporters.

The drought-hit farm sector that grew by 0.2 per cent against an anticipated contraction of 0.2 per cent helped push overall growth rate for the year a tad higher than the government's estimate of 7.2 per cent.

Growth of the Indian economy slowed to 6.7 per cent in 2008-09 after growing at close to 9 per cent for four years before a financial crisis in the West roiled the global economy. High prices, however, remain a key worry, bolstering the possibility of the RBI increasing key rates to tame inflation, thereby increasing home loan rates.

Wholesale prices-based inflation in April was estimated at 9.6 per cent, as food prices continued to remain high.

"Rising commodity prices may put pressure on investme-nt demand by raising production costs," said Samiran Chak-raborty, head of India research at Standard Chartered Bank.