Indian economy up 6.1% in Q1; Monsoon remains a worry
August 31, 2009
Showing signs of recovery, Indian economy grew by 6.1% during the first quarter of this fiscal, the highest since the global financial meltdown hit the shores last September, but erratic monsoon may dampen growth in coming quarters, reports PTI.
Despite manufacturing and some services like hotels still to come out of the crisis fully, gross domestic product (GDP) improved marginally from 5.8% in the previous two quarters, though it was much higher at 7.8% in the first quarter of last fiscal, according to figures released by the Central Statistical Organisation (CSO) Monday.
The rate makes India the second fastest growing economy among major countries after China, which recorded 7.9% growth in April-June quarter. However, stock markets discounted GDP numbers with the key equity index Sensex down 220 points.
Among sectors, except for manufacturing, farm, trade and hotel, others particularly mining, electricity and financing, performed quite well. However, agriculture production may be impacted by weak monsoon in coming quarters, analysts said.
The worst hit sectors were trade, hotels, transport & communication, posting 8.1% growth in the first quarter this fiscal compared to 13% a year ago. Manufacturing was down to 3.4% against 5.5% and agriculture to 2.4% versus 3%.
The growth is in line with the RBI and the government's expectations, which peg it to 6% with an upward bias.
"I am glad that worst may be over and we expect to see improved performance in subsequent quarters. The GDP numbers are very good, it is consistent with what we were hoping for," Planning Commission deputy chairman Montek Singh Ahluwalia told reporters.
With encouraging June quarter rates, the Government expects the economy to grow at 6.5% this fiscal. "We expect the GDP growth rate to be 6.5% or above. Growth in the economy was very encouraging and it is expected to improve further going forward," finance secretary Ashok Chawla told reporters in Mumbai.
Electricity generation and mining output were the best performers as they grew by 6.2% and 7.9% in the first quarter of this fiscal against 2.7% and 4.6% a year ago, respectively. Financing, insurance, real estate and business services also expanded by 8.1% against 6.9%. Construction was slightly down to 7.1% from 8.4% and community services by 6.8% from 8.2%.
But the government's optimism is not shared by everyone.
HDFC Bank chief economist Abheek Barua said,"We are expecting 5.8% for the entire fiscal, which means that growth in second and third quarters should come down. Farm production may be lower in the coming two quarters, he said, adding that industry and services sector may partly offset the dampening effect.
On farm sector growth, Crisil principal economist DK Joshi said monsoon could impact agriculture from third quarter onwards, but that would impact inflation more than GDP. Joshi said his organisation would take a call on revising current expectations of 6-6.5% growth for this fiscal later. "It is not likely to be revised upwards. Downward risks are more," he said.
Meanwhile, Planning Commission, which is expecting 6.3% growth this fiscal, will meet on Tuesday to take stock of the economy.
During the first quarter, when the Rabi crops are harvested, rice, wheat, coarse cereals and pulses recorded growth rates of 3.8%, 2.6%, 25.6% and 18.2% respectively from last year.
Among commercial crops, production of oilseeds increased by 13.6% during Rabi, while that of cotton and sugarcane recorded -10.5% and -22.1%, respectively during the agriculture year 2008-09.
Industries are also showing signs of early revival, though they are yet to recover fully from the slowdown. Growth for June quarter jumped to 7.8% from a meagre 1.2% and 2.2%, in the previous two quarters respectively. According to Commerce Minister Anand Sharma, industry grew by 7% in July