IF Finance Minister P Chidambaram happened to be the chief executive of a private sector firm, shareholders would be voting him a healthy bonus. Consider the numbers: the economy has been growing at a scorching pace, outperforming even the most optimistic forecasts. For four consecutive quarters, gross domestic product (GDP), globally used as a benchmark to gauge the economic health of a country, has been clocking 8.4 per cent growth or higher. The record 9.2 per cent logged for the July-September 2006 quarter is the highest single-quarter growth rate since 1988-89, when the economy recovered from a severe drought.
But the significant difference between then and now is scale. Today’s India is, in real terms, one of the largest economies in the world. To maintain the momentum is a signal achievement. What is encouraging is that the growth has been significant across most major sectors of the economy. Manufacturing, not surprisingly, has taken pole position, clocking a growth rate of 11.9 per cent. Core areas like electricity, gas and water have grown at 7.7 per cent. Construction, fuelled by the accelerated thrust on infrastructure creation, has grown at 9.8 per cent, while real estate, finance and business services have grown at 9.5 per cent. While this is higher than the previous quarter, it is a full per cent less than the rate for the comparable period of the previous financial year. This may partly be due to the monetary tightening implemented by the Reserve Bank of India for these sectors, in order to prevent a potential ‘bubble’ situation from developing. The ongoing boom in telecommunications has driven the second quarter growth rate to 13.9 per cent, the highest for any sector. The only concern is inflation, which is running somewhat high, largely due to supply constraints. Overall, though, India Inc. appears to be on a roll.
The news from Bharat, though, is not as encouraging. Agriculture, which still is the biggest sector in rural India, has decelerated sharply, with growth dropping from 3.4 per cent to 1.7 per cent. Perhaps, more alarming, is the report that inflation is at a 18-month high. Such trends have the potential of taking some of the gloss off the India growth story.