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Higher 05/06 GDP growth on robust demand

The Indian economy is expected to grow close to 8 per cent in the 2005/06 fiscal year, faster than the previous year.

india Updated: Feb 06, 2006 11:05 IST
Reuters
Reuters
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The Indian economy is expected to grow close to 8 per cent in the 2005/06 fiscal year, faster than the previous year, due to strong industry and services output, economists said on Sunday.

They said a normal monsoon in 2005 had also boosted farm output, which would trigger demand and services in rural areas where 60 percent of India's 1.1 billion population live.

"I expect growth to be around 7.7 per cent in 2005/06. The main drivers will be services and manufacturing," Saumitra Chaudhuri, economic adviser at domestic credit rating agency ICRA, said.

Chaudhuri expects manufacturing to grow around 7.8 percent, services by 9.9 per cent and the farm sector at around 2 per cent.

India's statistics office will release advance estimates for 2005/06 GDP on Tuesday after 0630 GMT. India's fiscal year runs from April to March, and GDP data for the October-December quarter is due later this month.

Last month, India's central bank raised its growth forecast for 2005/06 to 7.5-8.0 pe rcent from 7.0-7.5 per cent.

The government revised up gross domestic product growth for 2004/05 to 7.5 per cent from 6.9 last week, and the finance minister has said the 2005/06 expansion would be equally strong.

Asia's third-largest economy grew 8.1 per cent in April-to-September from a year earlier, boosted by a sharp pick-up in manufacturing as healthy rural earnings translated into higher spending.

India's industrial output, which generates a quarter of GDP, has also been rising on demand for cars, televisions and other goods driven by young consumers employed in the booming technology and back-office services sectors.

The services sector, comprising a little more than 50 per cent of GDP, is also growing at a fast clip. In the first half of the fiscal year it expanded more than 9 percent from a year earlier.

DH Pai Pananandikar, president of private economic think tank RPG Foundation, expects the economy to grow close to 8 percent in 2005/06.

"Basically it will be services and manufacturing, but I expect the farm sector to grow around 2.5 per cent," he said.

International agencies and economists say India needs to grow at a double-digit rate to cut mass poverty.

Indian policy-makers say high global oil prices remain a concern for faster economic expansion. India imports 70 per cent of the crude oil it consumes.

First Published: Feb 06, 2006 11:05 IST