GDP shoots up, but so could interest rates

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. HT reports. Bitter-sweet growth

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.

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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.

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.