India's Largest Database on New Projects
Strong agriculture output to sustain GDP growth
30 November 2010: The country's economic growth is expected to remain strong despite slowness in the manufacturing sector as a rebound in agricultural output is expected to support overall growth.
Growth in the key farm sector, which accounts for nearly 17 per cent of the nation's GDP, has been a concern for policymakers for the past few quarters. But, healthy monsoon has raised expectations of strong farm output during July-September 2010. In addition, the arrival of fresh crops has helped ease inflation to some extent though the overall price situation still remains worrisome at 8.58 per cent in October 2010.
Official GDP data for the second quarter of the current financial year (2010-11) will be released shortly. A quick survey of economists showed the economy probably grew around 8 per cent during this period, with estimates ranging between 7.3 per cent and 8.4 per cent. Most economists said the farm sector will record strong growth during the quarter—ranging from 3.5 per cent to 4 per cent.
While the expected Q2 GDP growth is lower than 8.8 per cent in the first quarter, the forecast is in line with the government's calculations.
But for economists, as well as policymakers, industrial production is a concern with growth rate decelerating in recent months. During September 2010, the sector grew by 4.4 per cent. What is even worrisome is the slowdown in imports, which indicates that the growth in raw material and inputs for the manufacturing sector has not been significant. The government is keen on a strong show by the industrial sector, which accounts for around a quarter of the economy, as it is a large employer.
Consumption—both in urban and rural areas—remains strong. Auto sales, demand for home appliances, telecom subscriber additions and cement production have been on an upswing. Evidence suggests that the government's rural jobs scheme has helped raise purchasing capacity in villages.
But inflation remains the dominant concern for the Indian economy. RBI has raised interest rates six times this year to check high inflation, but economists say RBI will remain watchful, considering the strong growth momentum and the uncertain global economic scenario.
Source: Times of India