Saturday, February 5, 2011

Strong farm sector to help GDP grow 8.5% in 2010-11

The government`s statistical office is expected to peg gross domestic product at 8.5% for the current financial year in the advance estimates that are due to be released on Monday. This reflects a mild slowdown from the 8.9% growth registered during the first half of 2010-11. During the last financial year, the economy had grown by 8%. 

The growth will be powered by the farm sector. Helped by abundant rains this monsoon, the agriculture sector that now accounts for less than one-fifth of the economy, is expected to expand by 6-6.5% according to the first official estimates. 

According to sources, per capita income is likely to grow at around 6.5-7% during 2010-11. 

Manufacturing sector, seen as the main job creator, is also going to be the biggest worry for policymakers with the sector showing signs of slowdown as inflation, and the subsequent increase in interest rates, is affecting capacity addition in the sector. 

The first estimates of GDP would be revised in May and again next January. 

The advance estimates of GDP are near the levels announced by finance minister Pranab Mukherjee but lower than what has been projected by several agencies including the Reserve Bank of India. In its latest monetary policy review, RBI had retained its earlier projection of 8.5% with the possibility of an upward bias. 

The Prime Minister`s Economic Advisory Council headed by C Rangarajan and the Asian Development Bank had estimated that the Indian economy would expand by 8.5% this year. 

Among the international agencies, the World Bank had projected a growth of 8.7% this year in its estimates released in January, but it is lower than the International Monetary Fund`s 8.8%. 

Economists say the robust domestic demand is the key driver for India`s growth as is evident from a spurt in the sale of cars and white goods. Though the worry is about growth being close to full capacity, the higher farm sector output would augur well for the industrial sector as rural income would get a boost.


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