India buoyant despite lower economic growth rate
India buoyant despite lower economic growth rate
Asian Economic Monitor, The Statesman, Asia News Network, New Delhi, India
During the mid-term appraisal of India's 10th Five-Year Plan
in June, Prime Minister Dr Manmohan Singh indicated a growth
target of 7 percent to 8 percent over the next two years.
He admitted that the performance so far was well below the
target of 8.1 percent, mainly on account of a low agriculture
growth of around 1.5 percent.
With economic growth averaging 6.5 percent in the past three
years, even with an acceleration, the country could not achieve
the original 10th Plan target of 8 percent growth over the Plan
period as a whole, the prime minister said.
Despite this modest appraisal, economic indicators show a
healthy growth in all sectorsagriculture, manufacturing and
services.Inc," in particular, is fairly upbeat about the
country's economic resilience and expects a healthy growth in the
current fiscal year.
The Confederation of Indian Industry (CII), for instance,
expects a sustained growth in industrial output this year and a
three-year increase of 24.8 percent. It expects the industry
sector of India's GDP to grow by 8.1 percent in the current
financial year, almost as fast as the 8.3 percent growth of 2004-
05.
The CII expects this year's growth to be broad-based with all
sectors of the economy doing well. It has forecast faster growth
in agriculture at 3 percent and high growth rates of 8.1 percent
for manufacturing and 8.3 percent in services - similar to
lastgrowth rates in these two areas.
This high growth rate in the economy was reflected in the
corporate scorecard of India Inc, with most companies, cutting
across industry sectors, reporting higher profits and higher
sales for the year ended March 31, 2005.
The official figures for the first quarter ending June, 2005
show a mixed bag as compared with the same quarter last fiscal,
with 20.3 percent higher tax collection this year and a lower
inflation rate of 4.10 percent in the week ended June 18, 2005 as
against 6.62 percent a year ago.
However, growth in the overall industrial as well as core
infrastructure sectors was lower this quarter. The fiscal deficit
in 2004-05 was higher though revenue deficit declined as compared
with 2003-04.
Agricultural growth is expected to pick up, while overall
industrial growth was 8.8 percent in April, 2005 compared with
8.9 percent in April, 2004.
Core infrastructure sectors achieved an average growth rate of
4.9 percent in the second quarter this year, compared with 8.2
percent in the corresponding quarter last year.
The broad money stock (M3) in the first half increased by 3.9
percent compared with the growth rate of 2.7 percent in the
corresponding period last year. The year-on-year growth was 14.2
percent (exclusive of conversion, 14.1 percent) compared with
15.3 percent in the same period last year.
Net foreign exchange assets (NFA) of the banking sector
registered a decline of 2.5 percent in the first half this year
compared with a growth of 9.1 percent in the same period last
year.
As at June 10, the bank rate was 6 percent, the same as the
corresponding date of last year. Call money rates (borrowing as
well as lending) were in the range of 4 percent to 5.75 percent
compared with 3.5 percent to 5.5 percent on the corresponding
date last year.
With the country witnessing an infrastructure boom, the inflow
of foreign institutional investments (FIIs) has sent the stock
market on a bull run.
The consumer is on the receiving end, with spending on the
rise as well. Favourable bank interest rates have also meant a
higher purchasing power.
Coupled with infrastructure development, including in the
housing segment, and easy financing schemes, real estate has
attracted considerable attention from the general public.
Easy bank loans and financing schemes are also reflected in
the increasing number of new cars, and to some extent two-
wheelers, on the roads. Each auto company offers an array of
schemes, backed by major banks, to lure customers.
The paying capacity of the average urban middle-class Indian
continues to rise as well, thanks to higher salaries driven
mainly by large and multinational corporations.
Economists and government bodies expect this consumer boom to
continue, if not rise further.