Monday, July 30, 2007

Growth rate set to blaze soon

1. Double-digit growth is no longer the preserve of China or some small oil economies. India’s growth rate for 2006-07 is likely to be revised upwards from the current estimate of 9.4% to almost 10%. This is because growth has been more robust than estimated in both agriculture and manufacturing, according to highly-placed government sources.

2. While releasing the growth figures for 2006-07, the finance minister had remarked, “The time has come to shed lingering doubts about the sustainability of high growth and scepticism about the shift to a higher growth trajectory.”

If indeed the growth rate is revised to about 9.8-9.9%, the base effect could be somewhat daunting for fiscal 2007-08. The question is if a near-10% growth can be sustained on the back of a similar rate of growth the previous year. Economists say growth in 2007-08 will reflect recent attempts by the RBI and government to tighten money supply by hiking interest rates.

3. A deliberate policy to somewhat cool down the economy may marginally decelerate the growth rate, even though we are in the middle of a new investment cycle. The chairman of prime minister’s economic advisory council C Rangarajan is fairly confident India is now experiencing an investment-driven rather than consumption-driven growth. This is the one critical factor that might deliver a consistent GDP growth of 9%-plus for another few years, officials believe

Source : Economic Times

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