At 7.9%,GDP data trumps forecast

Buoyed by government expenditure and rising consumer spend,Indias gross domestic product grew a robust 7.9 per cent...

Buoyed by government expenditure and rising consumer spend,Indias gross domestic product grew a robust 7.9 per cent in July-September 2009-2010,pushing up the growth rate to 7 per cent for the first half of 2009-10. The unexpected spike in the second quarter has raised hopes of a higher growth rate of about 7 per cent for the full year against the earlier estimate of 6.5 per cent.

Even though results have been good,it is important to see how agriculture growth will pan out in the third quarter as bulk of the kharif harvest is undertaken in the third quarter. Manufacturing has done extremely well in the second quarter while services have simply maintained pace, said Pronab Sen,Indias chief statistician. The manufacturing sector posted a healthy clip of 9.2 per cent over the corresponding period last year.

The highlight of a rebound in industry has been the sharp 9.5 per cent growth in mining and quarrying,largely because of increased gas production from Reliances KG basin. Reliances KG basic went on stream in April this year and the mining sector has consistently grown at double-digit or near double-digit levels since June. At full production,the KG basins gas output alone is expected to add 0.3 per cent a year to the countrys GDP.

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According to data released by the Central Statistical Organisation on Monday,GDP at factor cost for Q2 of 2009-10 is estimated to be Rs 8,34,780 crore registering a growth of 7.9 per cent over Q2 of 2008-09. The GDP growth in Q1 this fiscal stood much lower at 6.1 per cent compared with Q1 of the previous fiscal.

While Crisils principal economist D K Joshi said that this may motivate the Reserve Bank of India (RBI) to raise interest rates,Sen said the central bank should wait for third quarter results before tightening its current accommodative monetary stance.

Within the BRIC (Brazil,Russia,India and China) economies,India has fared pretty well. While Russia seems to be still battling recession having registering a contraction of 10.9 per cent and 8.9 per cent in the April-June and July-September 2009 quarters respectively,China has out-performed India. China recorded a growth of 7.9 per cent and 8.9 per cent in April-June and July-September quarters. Brazils economy contracted 1.2 per cent in April-June this year.

Economists,however,warn that the farm sector may play the black sheep in the pack because the real impact of a truant monsoon on kharif output will fully play out only in the third quarter. The first advance estimates for foodgrain production this year projected a 14-15 per cent decline compared with the previous year. Given that the kharif harvest of third quarter accounts for about 70 per cent of agricultural production,this may translate into a sharp 7-8 per cent decline in farm output during October-December. The farm sector accounts for about 17 per cent of the GDP.

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