A buoyant Indian economy grew at a blistering 9.3 per cent during April to June this year, while inflation fell below 4 per cent, its lowest in 15 months.
Economic growth measured by the gross domestic product (GDP) rode largely on robust performances by the manufacturing, construction and services sectors.
<b1>The farm economy, historically a laggard and a key concern for policy makers, beat all expectations to grow by 3.8 per cent in the first quarter of the current financial year 2007-08.
Inflation, another worry for government, also dipped to 3.94 per cent for the week ended August 18, latest government data on prices showed.
In the “slack season” credit policy in April, the Reserve Bank had pegged average annual inflation rate for 2007-08 at 5 per cent and said that it would be in the range of 4.0-4.5 per cent over the medium term.
The fall in inflation was largely triggered by a dip in prices of manufactured goods, although prices of food articles rose.
Finance Minister P Chidambaram exuded confidence about sustaining the high growth momentum throughout the year.
“Although provisional estimates of 9.3 per cent GDP growth during the first quarter are a shade below growth last year (in the corresponding period), but given the circumstances on account of external situation, they are quite satisfactory,” Chidambaram said.
He said that high savings and investment would drive economic growth. “I am confident that GDP growth rate will remain close to 9 per cent this year as well,” he added.
Planning Commission deputy chairman Montek Singh Ahluwalia echoed a similar opinion. “Growth has widely been expected to fall. RBI has expected an 8.5 per cent growth for the year. So, 9.3 per cent is good,” he said.
In July, the Prime Minister’s Economic Advisory Council (EAC) projected 9 per cent GDP growth for the current year. “The economy would grow by 9 per cent during 2007-08 assuming a reasonably benign monsoon and conducive external conditions,” EAC chairman C. Rangarajan had then said.
The latest data now indicate that sectoral growth rates might beat the council’s projections. For the year, the council projected that the farm sector would grow by 2.5 per cent, industry by 10.6 per cent and services by 10.4 per cent.
The International Monetary Fund was also bullish about the economy’s prospects and has revised GDP growth rate projections to 9 per cent from its previous estimate of 8.4 per cent.
The RBI on Thursday said although global imbalances could pose downside risks to the economy, growth momentum during 2007-08 was likely to stay on course.